The Political Economy of Cable “Open Access”

A policy of “open access” is advanced to counter the market power of cable television systems in video and broadband. While substantial market power exists, economic theory demonstrates that cable operators generally do not have incentives to discriminate against independent providers of Internet access or content, and market data suggest that vertical integration (foreclosing “open access”) is efficient. Moreover, historical experience shows that regulation of cable systems, including retail rate controls, leased access, and video dialtone, has proven anti-consumer. “Open access” is similarly likely to suppress, rather than expand, technology deployment, as seen in the lagging competitiveness of the “open” broadband platform (digital subscriber lines) offered by telephone companies. Indeed, common carrier regulation is shown to be a disincentive to investment in advanced telecommunications by observation of cable operator behavior. Cable systems under-allocate spectrum for high-speed network services, a practice that strategically counters the threat of regulatory appropriation implicit in “open access.”