Friday, May 11, 2007

California's AB 2987: Market competition in a tightly limited market

I agree in concept with Pacific Research Institute think tanker and TechNewsWorld columnist Sonia Arrison that allowing telcos to compete with cable companies for broadband video services as California's recently enacted Digital Infrastructure and Video Competition Act (AB 2987) provides is good public policy in that it spurs some degree of market competition. "California lawmakers -- and others across the nation -- would do well to learn from the success of cable franchise reform and discard recycled proposals to over-regulate the technology sector," Arrison opines.

The problem is that competition is geographically restricted, playing out in a limited market where both the telco and cable provider have a presence. Consumers not in these proscribed markets don't benefit from the increased competition envisioned by AB 2987.

In California and most states, there exists a de facto duopoly in which the big telcos and cable companies like AT&T and Comcast have the market all to themselves. There are few if any other competitors nipping at their heels and forcing them to provide more and improved services.

Exhibit A is the large number of broadband black holes that exist in California where hapless residents can't get broadband Internet access from their telco (who in AT&T's case tells them to "go suck a satellite") or from the cable provider (upon whose maps these would be customers simply don't exist). Here, AB 2987 fails to spur competition and better services and does nothing to expand broadband services to unserved areas of the Golden State since the legislation allows the telco/cable duopoly to offer services to just half of potential customers by 2012. That effectively locks the providers into the market they presently serve, creating two separate but unequal Californias -- one with broadband Internet access and the other without.

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