New Jersey Becomes the Battle Ground for Crucial US Regulation Debate

On November 28th, the Telecommunications and Utilities Committee of the New Jersey State Assembly held a hearing on the question of restructuring the state’s regulations governing cable television service.

The key controversy at hand is the state’s decades-old franchising requirement, which protects the incumbent cable companies and blocks potential competitors from entering the market place. As IPTV-News readers know, American telcos have the technological capability – after investing billion of dollars in their infrastructure – to deliver cable television service right to the curb. They should be invited into the homes, as well.

The battle in New Jersey has national consequences. Over time, state governments have codified local franchising procedures that date back to the 1970s. These franchising laws effectively protect incumbent cable operators from potential competitors. Texas was the first state in America to change these regulations to allow video providers access to a statewide franchise. New Jersey would be the second and would demonstrate a trend toward more competition and greater consumer choice. After New Jersey, the regulation dominoes could begin to topple across the United States.

State leaders in Trenton are debating issues large and small. On the macro level resides big principles such as fairness, competition and market economic. Should one company be the sole provider of land-based video services in the Garden State? Aren’t monopolies by their very nature allergic to new investment and innovation? Won’t competition keep consumer costs down and improve services? The answers, in order, are no, yes, and yes.

Under New Jersey law, the incumbent cable operator not only has a monopoly on cable video service, but it also is empowered to compete for voice and data service, as well. The result? Voice and data services – the competitive segments of the market – have seen rapid drops in their costs to consumers. But cable television – the protected segment – has seen a 38% increase in consumer costs over the past five years.

Market competition would stem this cost escalation. The General Accounting Office of the federal government estimates that the introduction of a land-based video competitor into a given market will trend prices down by 17%. In the town of Keller, TX, where the incumbent cable provider Time Warner Cable is forced to compete with the local telco Verizon, customers can subscribe to Verizon’s IPTV product for $13 per month less that the Time Warner’s offering.

Moreover, cable companies have reacted to the mere threat of direct competition by investing in new technologies, something they generally have avoided doing in a non-competitive environment. According to the Wall Street Journal, cable giant Comcast, Corp. "has 400 software engineers building what amounts to a TV version of the Internet, stocked with movies, archived television programs and other interactive features, including a search function." http://www.post-gazette.com/pg/05286/587978.stm

Finally, competition in Texas has forced Time Warner Cable to offer upgraded services, just to keep up with the competition. According to Bill Peacock of the Texas Public Policy Foundation: http://www.texaspolicy.com/pdf/2005-09-12-hbj-telecom.pdf

"And while the cable industry might not have liked the new legislation, it wasted no time in responding to it.

"Time Warner Cable has announced new services allowing people to track their eBay bids via their cable TV and display Caller ID on the television screen. New technology will allow cable companies to increase their bandwidth and offer more channels to subscribers.

"All this means that prices for video are likely to drop, just as they have in the past with voice and broadband. Additionally, the high tech economy will expand as the competition attracts new capital, spurs product innovation and creates new jobs."

Monopolies hinder economic growth, stifle innovation and harm consumers. The New Jersey State Assembly has taken a bold step toward ending their monopolistic protections of the cable industry.

Patrick Hynes writes for the blog the Channel Changer. http://www.channelchanger.typepad.com/