Indiana’s New Video Marketplace: Capitalizing on Competition

June 16, 2008

Indiana Writers Group column for release June 18 and thereafter (370 words)

by Alan Richardson, Ph.D.

“Hello, this is Comcast Cable, may I help you?”

“I have a question. A couple of days ago I got a mailing from AT&T saying I can now get both high-speed Internet service and 200 TV channels in my home on their new U-verse system for $68 per month. Then, in today’s mail I got your bill for $90.61 covering the same Internet service but with fewer than 100 channels of TV. So, tell me, why shouldn’t I switch?”

“Uh, well, um, just a moment please. Sir, sorry to keep you waiting. I have good news; we can reduce your bill to $65.65 and reissue your statement for this month."

While the above conversation is a condensed version, it did occur in response to this writer’s phone call in January of this year. I’m fortunate enough to live in Muncie where AT&T’s U-verse has become available in my neighborhood.

AT&T was attracted to Muncie and several other communities by Indiana’s pro-competitive telecommunications legislation in July 2006. Without the leverage of a strong competitor, in this case AT&T, there is no question that I would still be paying $90.61 each month for a long time to come. Economists will tell you that there needs to be three strong competitors in a market to hold prices in check for any given product or service.

In Muncie, Comcast has been the dominant provider since 2002. The direct-broadcast satellite and over-the-air broadcast signals, neither of which is strong enough to be effective competition by themselves, essentially combined to be a second effective competitor.

Today, with a telephone company also providing television programming along with high-speed Internet service, the third competitor has emerged. And it’s not just AT&T; Verizon in Fort Wayne has recently launched their version of U-verse, called FiOS.

Guess what? I benefited, and so will citizens around the rest of Indiana in the near future. This one small, true story illustrates with stark clarity the power of a competitive market — in this case in the telecommunications industry.

And in the event you are worrying, don’t — none of the cable, telephone or satellite providers face financial hardship. They’ll just take home a little less profit, which is money that stays in your pocket.
Dr. Alan Richardson is a professor of telecommunications at Ball State University and a senior fellow in the Digital Policy Institute. A version of this essay also was distributed by the university.



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