Hostname: page-component-586b7cd67f-dsjbd Total loading time: 0 Render date: 2024-11-24T21:53:07.372Z Has data issue: false hasContentIssue false

The Fallacy of Regulatory Symmetry: An Economic Analysis of the ‘Level Playing Field’ in Cable TV Franchising Statutes

Published online by Cambridge University Press:  20 January 2017

Thomas W. Hazlett*
Affiliation:
American Enterprise Institute, Z-Tel Communications
George S. Ford*
Affiliation:
American Enterprise Institute, Z-Tel Communications
*
American Enterprise Institute, 1150 Seventeenth St., NW, Washington DC 20036. E-mail: [email protected].
Z-Tel Communications, 601 S. Harbour Island Blvd., Suite 220, Tampa FL 33602. E-mail: [email protected].

Abstract

Formal regulatory parity can entail counterintuitive effects. In a series of state statutes, municipal governments have been directed to issue cable TV franchises to new competitors only after (a) formal hearings considering the ‘public interest’ in competition; and (b) imposing terms and conditions which are at least as burdensome as those contained in the incumbent's franchise. While billed as ‘level playing field’ laws, economic theory, an important case study in Connecticut, and a probit analysis of Ameritech's cable franchise acquisition strategy suggest that these statutes actually tilt the field against entrants.

Type
Research Article
Copyright
Copyright © V.K. Aggarwal 2001 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Applebaum, Elie and Katz, Eliakim. 1987. Seeking Rents by Setting Rents: The Political Economy of Rent Seeking. Economic Journal 97: 685699.CrossRefGoogle Scholar
Baron, David P. 2000. Business and its Environment, 3rd Edition. Upper Saddle River, NJ: Prentice Hall.Google Scholar
Baumol, W.J., Panzar, J.C., Willig, and R.D. 1982. Contestable Markets and the Theory of Industry Structure. San Diego: Harcourt, Brace, Jovanovich.Google Scholar
Beard, T. Randolph and Ford, George S. 1999. Competition Between Wireline Networks as Fragmented Duopoly with an Empirical Application to the Cable Television Industry. Unpublished Manuscript, Auburn University, Auburn, AL. Available at http://www.egroupassociates.com Google Scholar
Benham, L. 1980. The demand for occupational licensure. In Occupational Licensure and Regulation, edited by Rottenberg, S. Washington, DC: American Enterprise Institute.Google Scholar
Besen, Stanley M. and Crandall, Robert W. 1981. The Deregulation of Cable Television. Law and Contemporary Problems 44: 77124.CrossRefGoogle Scholar
Bienstock, Terry and Cunningham, James C. 1988. Florida's Excursion into the Realm of Cable Television Franchising. Florida Bar Journal 62 (February): 31.Google Scholar
Bork, Robert. 1978. The Antitrust Paradox. New York: Basic Books.Google Scholar
Boudreaux, Donald. 1988. Rent-Seeking and Legal Barriers to Entry. Journal of Public Finance and Public Choice 6: 6369.CrossRefGoogle Scholar
Brennan, Timothy J. 1995. Discrimination by Diversified Regulated Firms. Paper presented at the Southern Economic Association Convention, New Orleans, LA.Google Scholar
Caudill, Steven B. and Jackson, John D. 1989. Measuring Marginal Effects in Limited Dependent Variable Models. The Statistician 38: 203206.CrossRefGoogle Scholar
Cairns, R. D. and Mahibir, J. D. 1988. Contestability: A Revisionist View. Economica 55: 269276.CrossRefGoogle Scholar
Comanor, W. and Mitchell, B. 1972. The costs of planning: the FCC and cable television. The Journal of Law and Economics 15: 177206.CrossRefGoogle Scholar
Demsetz, Harold. 1982. Barriers to Entry. American Economic Review 72: 3747.Google Scholar
Federal Communications Commission [FCC]. 1994a. In the Matter of: Implementation of Sections of the Cable Television Consumer Protection and Competition Act—Rate Regulation, Buy-Through Prohibition. Third Report & Order. Docket Nos. 92–266 and 92–262.Google Scholar
Federal Communications Commission [FCC]. 1994b. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, First Report. CS Docket No. 94-48, 9 FCC Rcd 7442.Google Scholar
Federal Communications Commission [FCC]. 1995. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming: Second Annual Report. CS Docket No. 95-61.Google Scholar
Federal Communications Commission [FCC]. 1998. Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming, Fourth Report. CS Docket 97–141.Google Scholar
Federal Communications Commission [FCC]. 1999. In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996. CC Docket No. 98–146.Google Scholar
Formby, John P., Keeler, James P., and Thistle, Paul D. X-Inefficiency, Rent-Seeking and Social Cost. Public Choice 57: 115126.CrossRefGoogle Scholar
Gaskins, Darius W. and Voytko, James M. 1981. Managing the Transition to Deregulation. Law & Contemporary Problems 44: 932.CrossRefGoogle Scholar
Gelman, Judith, and Salop, Steven. 1983. Judo Economics: Capacity Limitation and Coupon Competition. Bell Journal of Economics 14: 315325.CrossRefGoogle Scholar
Gilbert, Richard J. 1986. Preemptive Competition. In New Developments in the Analysis of Market Structure, edited by Stiglitz, Joseph E. and Frank Mathewson, G. Cambridge, MA: MIT Press.Google Scholar
Haring, John. 1984. Implications of Asymmetric Regulation to Competition Policy Analysis. OPP Working Paper 14. Washington, DC: Federal Communications Commission.Google Scholar
Haring, John, and Levitz, Kathy. 1989. What Makes the Dominant Firm Dominant? OPP Working Paper 25. Washington, DC: Federal Communications Commission.Google Scholar
Hazlett, Thomas W. 1986. Private Monopoly vs. the Public Interest: An Economic Analysis of the Cable Television Franchise. University of Pennsylvania Law Review 134 (July): 13351409.CrossRefGoogle Scholar
Hazlett, Thomas W. 1990. Duopolistic Competition in CATV: Implications for Public Policy. Yale Journal on Regulation 7 (Winter): 65119.Google Scholar
Hazlett, Thomas W. 1991. The Demand to Regulate Franchise Monopoly: Evidence from CATV Rate Deregulation in California. Economic Inquiry 34 (April): 275296.CrossRefGoogle Scholar
Hazlett, Thomas W. 1995a. Telco Entry Into Video. Annual Review of Communications 212228.Google Scholar
Hazlett, Thomas W. 1995b. Predation in Local Cable TV Markets. Antitrust Bulletin 40 (Fall): 609644.CrossRefGoogle Scholar
Hazlett, Thomas W. 1996. Cable Television Rate Deregulation. International Journal of the Economics of Business 3 (July): 145163.CrossRefGoogle Scholar
Hazlett, Thomas W. 1997. Prices and Outputs Under Cable TV Reregulation. Journal of Regulatory Economics 12: 173195.CrossRefGoogle Scholar
Hazlett, Thomas W. 1999. Economic and Political Consequences of the 1996 Telecommunications Act. Hastings Law Journal 50: 13591394.Google Scholar
Hazlett, Thomas W. and Spitzer, Matthew. 1997. Public Policy Towards Cable Television, Volume I: The Economics of Rate Controls. Cambridge, MA: MIT Press.Google Scholar
Hillman, A. 1989. The Political Economy of Protection. Chur, Switzerland: Harwood Academic Publishers.Google Scholar
Hillman, A. and Riley, John G. 1989. Politically Contestable Rents and Transfers. Economics and Politics 1: 1739.CrossRefGoogle Scholar
Johnson, Leland. 1994. Toward Competition in Cable Television. Cambridge, MA: MIT Press.Google Scholar
Leidy, Michael P. 1994. Rent Dissipation through Self-Regulation: The Social Cost of Monopoly under Threat of Regulatory Reform. Public Choice 80: 105128.CrossRefGoogle Scholar
Madalla, G. S. 1983. Limited Dependent and Qualitative Variables in Econometrics. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Maurizi, A. 1974. Occupational Licensing and the Public Interest. Journal of Political Economy 82: 399413.CrossRefGoogle Scholar
McChesney, Fred S. 1987. Rent Extraction and Rent Creation in the Economic Theory of Regulation. Journal of Legal Studies 16 (January): 101118.CrossRefGoogle Scholar
McChesney, Fred S. 1997. Money for Nothing. Chicago: University of Chicago Press.Google Scholar
Meyer, John R. and Tye, William B. 1988. Toward Achieving Workable Competition in the Industries Undergoing a Transition to Deregulation: A Contractual Equilibrium Approach. Yale Journal on Regulation 5: 273298.Google Scholar
Noam, Eli. 1985. Video Media Competition: Regulation, Economics, and Technology. New York: Columbia University Press.Google Scholar
Noam, Eli. 1994. Is Telecommunications Liberalization an Expansionary Process? In Asymmetric Deregulation, edited by Noam, Eli and Pogorel, . Norwood, NJ: Ablex Publishing Company.Google Scholar
Noll, Roger G. 1995. The Role of Antitrust in Telecommunications. The Antitrust Bulletin 40 (Fall): 501528.CrossRefGoogle Scholar
Owen, Bruce M. and Braeutigam, Ronald. 1978. The Regulation Game: Strategic Use of the Administrative Process. Cambridge, MA: Ballinger.Google Scholar
Owen, Bruce M. and Greenhalgh, Peter. 1986. Competitive Considerations in Cable Television Franchising. Contemporary Policy Issues 4 (April): 6977.CrossRefGoogle Scholar
de Sola Pool, Ithiel. 1990. Technologies without Boundaries: On Telecommunications in a Global Age. Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
Posner, Richard A. 1971. Taxation by Regulation. Bell Journal of Economics and Management Science 2: 2250.Google Scholar
Reveal, Ernest I., Mott, III, and Sarah D. 1989. Franchise Overbuilds, Franchise Fees, Access Channels and Other First Amendment Cable Litigation Issues. Unpublished manuscript.Google Scholar
Riordan, Michael, Bolton, Patrick, and Brodley, Joseph. 1999. Predatory Pricing: Strategic Theory and Legal Policy. Unpublished working paper.Google Scholar
Salop, Steve. 1979. Strategic Entry Deterrence. American Economic Review 69: 335338.Google Scholar
Salop, Steve, Scheffman, and David T. 1983. Raising Rivals Costs. American Economic Review 73: 267271.Google Scholar
Schankerman, Mark. 1994. Competition Through Regulatory Symmetry. Submitted as attachment to GTE's comments in the FCC's price cap review proceeding, CC Docket No. 94-1 (9 May).Google Scholar
Schmalensee, Richard. 1978. Entry Deterrence in the Ready-to-Eat Cereal Industry. Bell Journal of Economics 9: 305327.CrossRefGoogle Scholar
Schmalensee, Richard. 1981. Economies of Scale and Barriers to Entry. Journal of Political Economy 89: 12281238.CrossRefGoogle Scholar
Shubik, Martin and Levitan, Richard. 1986. Market Structure and Behavior. Cambridge, MA: Harvard University Press.Google Scholar
Spence, A. Michael. 1977. Entry, Capacity, Investment and Oligopolistic Pricing. Bell Journal of Economics 10: 534544.CrossRefGoogle Scholar
Telesat. 1990. Comments of Telesat Cablevision, Inc. Submitted in FCC MM Docket No. 89–600.Google Scholar
Tirole, Jean. 1995. The Theory of Industrial Organization. Cambridge, MA: MIT Press.Google Scholar
Van Witteloostuijn, Arjen. 1993. Multimarket Competition and Business Strategy. Review of Industrial Organization 8: 83100.CrossRefGoogle Scholar
Ware, Roger. 1984. Sunk Cost and Strategic Commitment: A Proposed Three-Stage Equilibrium. Economic Journal, 94: 370378.CrossRefGoogle Scholar
Williamson, Oliver. 1976. Franchise Bidding for Natural Monopoly: In General and With Respect to CATV. Bell Journal of Economics & Management Science 7 (Spring): 73104.CrossRefGoogle Scholar
Zupan, Mark A. 1989. The Efficacy of Bidding Schemes in the Case of Cable Television: Some Systematic Evidence. Journal of Law & Economics 32 (October): 401456.CrossRefGoogle Scholar
Zupan, Mark A. 1990. On Cream Skimming, Coase, and the Sustainability of Natural Monopolies. Applied Economics 22: 487492.CrossRefGoogle Scholar