Cable Companies Free To Grow, Grow, Grow

Dasheiff writes: "A federal appeals court [NYTimes, free reg. req. ^[?] ] struck down a set of regulations today that had prevented the nation's largest cable companies from growing beyond serving more than 30 percent of the cable and satellite market's subscribers and providing more than 40 percent of its channels with programming from its affiliated companies. In other words AT&T and AOL Time Warner can now continue to expand their monopoly. However it's not clear if this is a bad thing, if shows continue to be poor people will not watch them. Companies need to compete with the viewer more than the other companies." So, were those limits actually doing customers good or not? And will this make high-speed access (even if AOL-TW dominated) available in many places it's not right now?

Comments

A monopoly can be more than one company

[fhwang]

More then one person has noted that there are two companies being named here (AOLTimeWarner and AT&T) and argued that if you have more than one company, you cannot have a monopoly. While this might be correct semantically, it is certainly incorrect in spirit.

Depending on which dictionary you go to, monopoly is either held exclusively by one company, or by a group. (Dictionary.com uses the word "group", while Merriam-Webster just refers to a single company.) The definition of "group" is what's important here. There are many instances in business history where competitors in one field got together to agree not to compete in certain ways -- most notably by price-fixing.

Free-market economic theory would indicate that CEOs would never do this, that they would decide to compete in any way possible to eke out more market share. Yet this does happen. We have documented cases of price-fixing across all sorts of industries: legal research, oil firms, even vitamin manufacturers. There are plenty of theories as to why it happens, though my personal favorite is psychological. I think that CEOs, when they're placed in charge of vast corporations they cannot entirely control or understand, become extremely risk-averse. This is why large corporations rarely innovate; it's also why a CEO might enter into a price-fixing agreement. It's just one less thing to worry about. At least for the CEO; everybody else usually suffers, in higher prices and poorer quality.