Cable TV competition on its way

Cable TV gripes are not new.Costa Mesa residents are getting upset lately over quality-of-service issues and ever-increasing prices for cable TV.

Nothing infuriates a customer more than having to wait on hold for 25 minutes to solve a simple billing problem.

The basic problem for consumers is that cable TV by its nature is a monopoly; and monopolies, unlike other businesses, do not have to compete to keep or get business.

They know that because you cannot get the service anywhere else they can keep you on hold and that there is nothing you can do. It costs them more money to add service representatives. It costs them nothing to keep you on hold.

Unlike with other monopolies such as electrical, natural gas and water utilities, cable TV prices and quality of customer service are not regulated by the government.

Now, I can hear all the cable executives screaming about how they are not really a monopoly and that they have competition from two satellite providers, DirecTV and Dish Network.

Though there is some truth to this, cable TV’s ability to also deliver Internet and phone service on the same network gives those companies a competitive cost advantage over their satellite colleagues.

The best satellite can do is force cable into a duopoly. This is where you have two competitors in a marketplace.

I’ll spare you a painfully long explanation of French economist Antoine Augustin Cournot’s duopoly model, but let’s just say that duopolies compete on anything but price.

Once a duopoly is established, it is clear to both companies that lowering price hurts them.

Therefore, they may have lower introductory prices (three months free, etc.) as a sales gimmicks to get more market share, but they will never compete on price over time.

Now take note that I am not advocating that government regulate the cable companies.

But I also do not want government to protect them. This is what, until last year, was happening around California.

Local governments were, through the local cable franchise system, protecting cable TV franchises from competitors.

In October of 2006 that all changed when California passed the Digital Infrastructure and Cable Competition Act.

Now a cable competitor gets its franchise for the whole state. No longer can local jurisdictions shake down cable competitors to get local approval.

Now, finally, real competition is just around the corner. It is coming in the form of light beige utility boxes being installed throughout the city. What is in those boxes will finally bring long-awaited competition to cable TV in Costa Mesa.

AT&T is installing its fiber-to-the-neighborhood network, which will have not only high-speed Internet but also TV and phone service.

Several years back the cable TV companies got into the phone and Internet business.

They already had a wire to your house, and now with newly developed technology, they can deliver Internet and telephone service over that same wire.

This has been so successful that in South County the cable company has more phone subscribers than the local phone company.

The cable companies brought real competition to the local phone company for phone service and also Internet access.

The local phone companies were already getting fierce competition from wireless carriers, but it was cable that finally forced down prices.

Long distance is now basically free. In fact, more than 50% of people younger than 30 have never had a land-line phone in their home. The local phone company was not going to sit around and take the financial beating as more and more Americans disconnected their phone lines and replaced it with their cable or wireless phone.

If the cable companies want to compete on phone service, then the phone companies will compete on TV service.

And that is where we are at. AT&T is spending billions to bring TV, phone and Internet service to customers all across the country. That competition is now coming to Costa Mesa.

Mayor Eric Bever has also leveled the playing field by letting AT&T have the public access feed that broadcasts City Council and Planning Commission meetings.

Costa Mesa residents are spending more than $16 million a year on cable TV, and for the first time in 30 years, we are going to have some competition for that business.