Why is cable a monopoly?

The vast majority of cable TV customers in the United States do not have a choice of cable providers. Competition among large cable TV companies does exist on a national level. The major cable TV companies compete among themselves to attract more customers and generate higher profits for their firms and their shareholders. It is a different story entirely on the local and regional level. A single cable TV provider serves most individual American cities, communities and regions. Consumers in those regions who do not like their local cable TV company for any reason are typically out of luck. They also are out of options. There is a distinct lack of competition in the cable TV business in most areas.

Experts on the telecommunications industry refer to this business landscape as a natural monopoly. The term indicates a situation in which the cost to enter a market becomes prohibitively expensive for any potential competing companies. In the cable TV industry, the enormous fixed cost of physically putting in new cable lines serves to keep new competitors out of mature markets. As a result, the cable company that owns or controls the existing cable lines has a monopoly in the area.

Critics maintain that this arrangement leads to high prices and dissatisfied customers. They argue that increased levels of competition would lead to lower costs for consumers, better service by the companies and a more satisfactory experience for cable TV viewers. Some critics contend that better regulatory decisions by the government could help boost competition in the market and eventually aid consumers of cable TV.

The origins of the cable monopolies that exist in most regions throughout North America can be traced back to a series of telecommunications acts adopted by the government over the past several decades.

Cable Communications Policy Act of 1984

The Cable Communications Policy Act of 1984 emerged as a favorable measure for local cable companies that were hoping to maintain their strength in existing markets. The act limited the ability of local government agencies to regulate cable TV rates in many instances. It also granted incumbent cable TV companies assurance that they would be able to hold onto their local franchise. A mandate in the act that attempted to diversify commercial cable programming was so weak that it was quickly deemed irrelevant. This measure helped build the groundwork for the cable monopolies that continue to exist today.

Cable Television Act of 1992

Formally known as the Cable Television Consumer Protection and Competition Act of 1992, this measure aimed to get a handle on increasing rates for cable TV service and encourage a more competitive landscape in many communities. The act imposed some rate regulations on cable TV firms. It placed limits on the ability of cable providers to block certain content. It also attempted to spur diversity in programming by encouraging leased channels, noncommercial programming and local broadcasting signals. The act did keep rates down in many regions. Several technical loopholes in the measure allowed cable providers to maintain a monopoly in most communities.

Telecommunications Act of 1996

Executives with the large cable companies were much more pleased with this measure than they were with the 1992 act. The 1996 act got rid of most of the rate regulations that had been adopted previously. Some regulation remained on the most basic tier of cable TV service. The Telecommunications Act of 1996 also confirmed the notion that cable TV firms are not subject to common carrier controls. As a result, the local monopolies maintained by cable TV companies in many regions were strengthened.