Cable Regulation in the Internet Era

The market for multi-channel video programming (MVPD) has undergone considerable change in the last 15 years. Telephone operators ("telcos") have entered in some parts of the US and online video distributors are a growing source of television viewing. Direct-Broadcast Satellite service, spurred by 1999 legislation that leveled the playing field with cable television systems, has grown from 3 percent to 33 percent of the combined US MVPD (cable, satellite, and telco video) market. This chapter considers cable television regulation in light of these developments. It first surveys the empirical record on the effects of price regulation in US cable markets across the four major periods of regulation and deregulation, with particular focus on potential price and quality tradeoffs. The evidence suggests that unregulated periods exhibit rapid increases in quality and penetration (and prices), while regulated periods exhibit slight decreases in prices and possibly lower quality. Consumer welfare estimates, while few, suggest consumers prefer unregulated cable services. The chapter next reviews the incomplete evidence on competition between cable operators, and between cable and satellite or telco providers. It concludes with consideration of four open issues in cable markets: horizontal concentration and vertical integration in the programming market, bundling by both cable systems and programmers, online video distribution, and temporary programming blackouts from failed carriage negotiations for both broadcast and cable programming. While the distribution market is clearly now more competitive, concerns in each of these areas remain.