California lawmakers give cable utility perks, without utility obligations

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

Quirky economics.

Cable companies want the benefits of being a legally recognised public utility, but not the responsibilities. One of those benefits is to be compensated when a public works project requires the relocation of lines, either on poles or underground. The California assembly’s communications and conveyance committee thought that cable companies deserve it too, and unanimously endorsed a bill yesterday that would reimburse them for relocation work when a project is being paid for out of bond money that’s been approved by voters.

Assembly bill 1145 is sponsored by the California Cable and Telecommunications Association, the cable industry’s Sacramento lobbying front. That means CCTA wrote it and then found a legislator to carry it. “Author” it, as the term of art goes. That friendly fellow turned out to be assemblyman Bill Quirk (D – Hayward). He presented the bill, and launched into what sounded like the beginning of a history lecture before being cut off by an affable “move the bill” from a sufficiently educated committee member.

Quirk did have enough time to descend into complete nonsense. He tried to draw a false distinction between “regulated monopoly utility companies” and cable companies. The only good thing that can be said is that it turned into bipartisan nonsense, when the ranking republican on the committee, Jay Obernolte (R – Big Bear) agreed, saying cable companies are not a “natural monopoly”.

Historically, there was a difference between telephone companies, which have been state regulated utilities for more than a century, and cable companies, which were originally franchised by local governments but managed to escape that oversight ten years ago. At least in California. Today, the differences are diminishingly small, particularly in urban and suburban markets where cable and telephone companies sell the same services and enjoy a comfortable, unregulated duopoly.

The distinguishing characteristics of a natural monopoly are high initial capital costs, usually related to infrastructure construction, and powerful economies of scale, both of which give the first mover in the market insurmountable advantages over would be competitors. In the old analog world, telephone and television service were completely different businesses, linked only by a common dependence on wireline networks. Now, both offer voice and video, and face competition in those segments from wireless providers. But they are also almost always the only wireline broadband option and wireless service is not a credible substitute, in either practical or microeconomic terms.

So yes, if phone companies are reimbursed for moving their lines then cable companies should be too. They should be treated the same. In every way. Bringing cable operators and telcos under the same regulatory umbrella is the only rational approach in today’s digital world. The way to do it is not to continually give cable (or telephone) companies special carve outs in state law, as AB 1145 does. The way to do it is to recognise and regulate them for what they are: two formerly natural monopolies who have merged into an interchangeable duopoly.