On December 20, 2006, the FCC ruled that local governments should “speed up the approval process for new competitors [for providing cable services], cap the fees paid by new entrants, and ease requirements that competitors build systems that reach every home”1according to the Associated Press. Is this FCC regulation of the cable service market fair?
Proponents of the FCC ruling state that the new regulation should allow more competitors into the cable service market through reducing demands of the local government to new entrants, which should lead to better consumer satisfaction with their cable service provider.
Opponents of the ruling argue that the new regulations will lead to “cherry picking”1, where new cable providers will only better serve the rich neighborhoods, leading the rest of the consumers with their original cable service problems. In addition, opponents of the regulation believe that there will be loss of local oversight due to the “federalization” of the cable market and fewer funds available for public channels.
From an economic prospective, the answer to the question is no. The FCC regulation will get rid of the barriers to entry in the cable market that were set up by the local governments. If this is the case, then there should be an increase in consumer satisfaction of their cable service providers because there will now be more competitors in the market, which will allow consumers to have more options in choosing a good cable service provider.
There also should be no threat of “cherry picking” in the long run because all the firms will be more competitive, thus the old firms will offer incentives (e.g. lower prices) and the new firms will want to expand their services so that they have the largest consumer base possible from which to generate revenue.
The only unsolvable issue left in this case is the dispute between the powers of the local government and the federal government. Does the federal government have the right to impose these regulations on the local government? The answer must be a yes, since the federal government is a higher hierarchical bureaucracy than the local government. Furthermore, the federal government deals with issues that concern not only localities, but the
Works Cited
1“Local Governments: FCC Not Playing Fair” by John Dunbar
Posted By: Lance Wang, Chris Doyle, and Caryl Huynh
1 comment:
This post gets it right – the FCC’s decision makes very good economic sense. Lowering barriers to entry will increase competition which, in the long run, will reduce dead weight loss and ultimately increase social welfare. However the question of local versus federal control is not so easily settled as this post would imply. The issue may be more aptly addressed by a political scientist than by an economist, but unfortunately, the issue has a long and complicated historical past reaching back to debates over the Articles of Confederation. Those in favor of more local control argue that localities know what is in their own best interest and that many federal regulations amount to unconstitutional violations of the 9th and 10th amendments. Proponents of this regulation, however, may point to certain judicial interpretations of the Constitution such as the interstate commerce clause, or to the FCC’s legislative charter.
Often, the economic justification for a regulation is not the only argument a government agency must consider. Unfortunately, not everyone is an economist!
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