Cable Industry Oligopoly To Get Its Just Deserts?

October 29, 2007

Will the FCC put an end to cable industry oligopoly?The biggest advantage for any company with a monopoly is the freedom to pretty much throw out the customer service manual. Sure, you may have to do a dog-and-pony show to appease regulators every now and then, but at the end of the day you pretty much have free rein to dictate the rules of pricing and service, consumer be damned. AT&T Corp. before its court-ordered breakup in 1984 serves as a textbook example of the hazards when a company is allowed absolute domination of a market. That company’s attitude was best captured in a bumper sticker bearing the Bell logo and the following caption: “We don’t care. We don’t have to. We’re the phone company.”

Cable companies until just recently enjoyed such monopolistic freedoms, though their industry is probably better defined as an oligopoly. Individual cable providers long-enjoyed exclusive contracts to provide service to entire communities and apartment buildings, which has allowed them to raise prices more than a whopping 90 percent over the past 10 years. The ensuing monopolistic mindset is best reflected by their rigid pricing approach and broadly bundled channels, uniformly bad customer service, and appalling practice of expecting their customers to put up with a three- or four-hour time estimate of when a technician will be on-site to provide installation or maintenance service. Imagine a restaurant or your local pizzeria delivery joint trying to get away with that approach…

The Federal Communications Commission appears poised to serve the cable industry its just desserts. The New York Times reports today that the agency is preparing to invalidate all contracts that give individual cable companies exclusive rights to provide service in apartment buildings. The decision will likely prove to be a big boon for consumers, as studies show that when an alternative cable service is made available, prices can drop as much as 30 percent.

Verizon Communications and the new AT&T (not to be confused with the old, “Ma Bell” monopolistic one) are still in the process of rolling out their fiber optic services, but they do seem inclined to make an aggressive play for marketshare. Unfortunately for consumers, these two companies are also notorious for bad customer service, so I doubt we’ll find much relief on that front. But hey, if the increased competition drives down service costs across the field, that will be a small victory enough.

The cable industry has signaled it will challenge the FCC’s rule in court. No doubt the hearings will be scheduled to start sometime between 1 p.m. and 4 p.m.