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Saturday, November 6, 2010

Fox vs. Cablevision

There was a dispute between Fox and Cablevision, regarding the fee for carrying the over-the-air signal. As usual, coverage of the dispute was entirely pro-State trolling, on both sides.

There are two conflicting laws. First, cable companies are required to carry the over-the-air signal. Second, broadcasters are allowed to charge the cable company a fee.

What is the fair fee? The cable company has a monopoly. The broadcaster has a monopoly. When two State monopolies have a dispute, the only solution is brinkmanship negotiating. Another example is sports leagues vs. players' unions. The incentive is to wait until the last minute to make a deal. The two sides are disagreeing over how to split the economic rent of the State monopoly. It isn't a real free market negotiation.

It seems that every few months, there's a dispute between a network and a cable provider. The rules of the State cable monopolies explicitly encourage such disputes.

There's one obvious solution to disputes like Fox vs. Cablevision. There should be unbundled pricing. Cable subscribers should be allowed to pick and choose whatever channels they want. If a channel decides to charge a high fee, then customers can decide to drop it.

Another obvious solution is "Anyone should be allowed to lay cable and start their own cable business." The cable corporation has an explicit State-backed monopoly. Competition is illegal.

"Bundled pricing" is a clear indication of a monopoly. The customer is forced to buy things they want, in addition to things they don't want. When I buy Windows, I'm forced to pay the development cost of IE, even if I use FireFox.

Cable companies don't want unbundled pricing. It would cost them part of their monopoly pricing power. Media companies don't want unbundled pricing. If I buy Comedy Central, I'm forced to also buy MTV and other Viacom channels. Neither side wants reform.

Also, cable companies have a monopoly. In NYC, you get Cablevision or Time Warner, depending on where you live. There is no place where you have a choice. By parceling out monopolies, politicians maximize corruption opportunities.

It's explicitly illegal for me to lay down wires and start a cable business. The broadcast networks were given the monopoly right to use certain frequencies for free. Competition is illegal.

In the Fox vs. Cablevision dispute, the mainstream media was completely pro-State trolling. Nobody said "WTF? Offer unbundled pricing! Let customers pick and choose what channels they want! If Fox executives want to overcharge, let customers have to option of not paying." Nobody said "WTF? Why should the local cable corporation have a monopoly? Why not let someone else lay cable and compete?" There is indirect competition, via satellite TV. Some phone corporations offer TV service now, but FIOS isn't available where I live.

Unbundled pricing is easy to implement. The cable corporations and media corporations resist, because it would make their monopoly less lucrative. "Bundled pricing" is a clear indication of an abusive monopoly.

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