Pelican Parts Forums - Ever wonder why Comcast is so expensive/over priced

Quote:

Originally Posted by Superman (Post 5398115)

There must be some mistake. According to what I've read, private businesses are very very efficient. It is only gubmit offices that are inefficient. Supply and demand, market forces, ensure efficiency in private businesses.

Yes there is a mistake. It's called giving a private company a monopoly.
How many cable companies are there in most areas? Just one? Why?
Because the gubmint says that's all they can have. Cable companies were gettting stinking rich for a long time because of gubmint interference and regulation, basically selling licences and monopolies. Private businesses are not as efficient when the gubmint eliminates or prevents competition.

Quote:

Cable as a "Natural Monopoly"

Nearly every community in the United States allows only a single cable company to operate within its borders. Since the Boulder decision [4] in which the U.S. Supreme Court held that municipalities may be subject to antitrust liability for anticompetitive acts, most cable franchises have been nominally nonexclusive but in fact do operate to preclude all competitors. The legal rationale for municipal regulation is that cable uses city-owned streets and rights-of-way; the economic rationale is the assumption that cable is a "natural monopoly."

The theory of natural monopoly holds that "because of structural conditions that exist in certain industries, competition between firms cannot endure; and whenever these conditions exist, it is inevitable that only one firm will survive." Thus, regulation is necessary to dilute the ill-effects of the monopoly.[5] Those who assert that cable television is a natural monopoly focus on its economies of scale; that is, its large fixed costs whose duplication by multiple companies would be inefficient and wasteful. Thus, competitive entry into the market should be proscribed because it is bound to be destructive.

Most natural monopolies turn out to be self-fulfilling prophecies. Once a governmental entity has determined that a certain activity is a natural monopoly, it is within its power to so decree by limiting entry into the market to a single producer. Such is the case with cable television.

The typical municipal government will not permit wiring for cable television until it has solicited bids through issuance of a Request for Proposals (RFP), which establishes minimum prerequisites for all bidders (such as channel capacity and allocation, community access, and construction requirements). The bidders tacitly understand that they are bidding for the exclusive right to serve the community, and base their proposals on an expectation of monopoly profits. After submittinq proposals, the bidders battle one another through the use of such weapons as cocktail parties, media campaigns, and prominent community advocates known in the industry as "rent-a-citizens." The RFP process itself effectively excludes all but a few companies from offering services to potential subscribers, in that most companies do not have the financial backing to meet the city's articulated prerequisites or to engage in the political gamesmanship involved in nearly every contemporary franchise contest.

The Denver franchise, awarded in 1982, provides an example of this process. Of 53 companies expressing an interest in serving Denver's citizens, only 3 submitted proposals. Each of the bidders spent approximately $1 million in the political contest to win the franchise.[6] The massive regulatory scheme imposed on the winner is embodied in a permit and contract of over 100 pages that incorporates by reference a four-volume proposal. Among other requirements, the franchisee must

- pay 5 percent of its annual gross revenues as a franchise fee, plus an additional 2 percent for community programming;

- defray the city's expenses for the RFP process ($80,000);

- provide a $1 million construction bond and a $100,000 letter of credit;

- grant $1.5 million in loans and capital to small businesses and minority groups;

- wire the entire city according to a fixed construction schedule based on political rather than practical considerations;

- agree to pay $1,000 penalty per day for franchise violations;

- submit to rate regulation;

- allow the city to veto programming changes;

- set aside all or part of 22 channels for programming access, and cede editorial control over them !

- build studios and other facilities for access to selected special-interest groups at a cost of $7.34 million; and - provide an emergency override system that enables city officials to turn on subscribers' sets, adjust the volume, and broadcast "emergency" messages into their homes at any hour of the day or night.

In exchange, the franchisee receives a de facto exclusive 15- year franchise and is insulated from some of the effects of competition through a guaranteed rate of return.

But uh oh, in steps the satellite dish companies and the cable company all the sudden has competition! Their profits go way down, they make less money, pretty soon they'll be out of bidness. That's how it goes in the private world. you make money or you go away! Or sometimes, they get gobbled up by a super large conglomerate like time-warner. They have enough money to think they can take a loser and turn it around and make it profitable. If it works the company stays alive. if it doesn't the company gets closed down or if they are lucky, it gets sold to another large company and they give it a try. Eventually a loser business dissapears. Either that or they get rid of the blood sucking union so they can be profitable and survive ;)

But the gubmint is different. There if you don't make money or you spend too much, you get a raise.