Issue Analysis: Video Programming and Consumer Choice

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INTRODUCTION

Today’s technologies have transformed the way we live, touching almost every aspect of our lives, from how we talk to others, to how and what we listen to, to what we watch and where we watch it. Cell phones, iPods, TiVos, and flat screen TVs are at the forefront of a technological revolution that is providing dramatic consumer benefits.

While not as visible, the benefits go well beyond simple entertainment to such important areas as telemedicine and distance learning. Indeed, the entire technology sector is in the midst of a transformation: a number of cable
companies and others—including Skype and GoogleTalk—are offering Internet telephony. Verizon, a traditional phone company, has introduced video programming services in Texas. The newly reconstituted AT&T and other phone companies also are poised to offer video services in a growing number of states. Going even further, cable stalwart Time-Warner has unveiled video over Internet in San Diego, and television over cell phones is becoming a reality through the efforts of MobiTV and VCast.

Unfortunately for consumers, one area that seems impervious to technological change is regulation. Despite advances in science and technology over the last 20 years, the high-tech world continues to labor under regulations last updated in 1996, when today’s cutting-edge technologies were not even on the shelves. As a consequence, there is a disconnect between technology and consumer expectations on the one hand, and regulation on the other, with outdated laws hurting consumers by hampering the adoption of new technologies.

Even more troubling, incentives within the regulatory regime make it difficult to correct this divergence between technology and regulation. Technological advance constantly leads to new consumer goods and services. Yet regulations written for monopolists that no longer exist impede progress through artificial barriers and bureaucratic constraints. For decades, the goal of state and local regulators has been to regulate monopolies in an attempt to achieve economies of scale while avoiding the negative aspects of sole providers.1 This world of regulated monopolies blurred the distinction between industry and government, with state and federal regulators having significant influence over such critical variables as output and price as well as the services and features offered to consumers. In addition, regulated industries proved to be ideal revenue collectors that allowed state and local governments to farm out tax collection in less than transparent ways. In this world, consumers bore the brunt of these regulatory policies:
limited choices, above-market prices, and hidden taxes.

Please click here to download the full .pdf of the study (4 MB)