Will Video Business Change as Telecom Did in Wake of Telecom Act?

By Gary Kim August 07, 2013

The Federal Communications Commission’s latest report on video competition occurs at an interesting time. Though over the top alternatives have not yet truly had much financial impact on the video entertainment business, most observers think it is only a matter of time.

James Dolan, CEO of Cablevision Systems Corp., has just recently said he could envision a time when video entertainment would not be a service Cablevision sells. That is akin to a telco saying it could envision a time when voice would not be a service it sold.

Time Warner Cable CEO Glenn Britt said in 2011 that broadband already is cable’s anchor service, a less dramatic way of saying the same thing as Dolan. 

Image via Shutterstock

As so often happens, rules and laws that made sense in one era are outmoded in a changed and new era, and some might argue that is about to happen to the cable TV and subscription video entertainment business.

It is one thing to argue that robust competition in the subscription video entertainment business means some older rules now are less necessary. It might further be true that the financial health of the industry is about to change.

When the landmark Telecommunications Act of 1996 was debated and passed, observers thought it was important because it would introduce new levels of competition and spur innovation in the voice business.

But something else happened. The revamp of U.S. communications policy occurred just prior to the arrival of the Internet and popularization of mobile communications, both of which revolutionized communications.

The point is that even the best-intentioned policymakers did not foresee that the assumptions upon which the law was based were within a few years to be rendered almost moot.

Some might argue rules governing video subscription services are in much the same position. Despite concerns that prices are too high and that choices are too few, over the top Internet-delivered alternatives are poised to eventually render the concern moot.

To be sure, the FCC’s findings indicate that nearly 131 million (approximately 99 percent of) American homes have access to three multichannel video programming distributors (one terrestrial cable and two satellite providers).

Also, 46.8 million homes (approximately 35.3 percent) have access to four suppliers (two terrestrial and two satellite), the Phoenix Center or Advanced Legal & Economic Public Policy Studies notes.

One might rightly say even that the level of competition is insufficient to drive innovation in the business. But that innovation is coming. Just as competition in telecommunications came from outside the fixed network voice business (Internet and mobile), so too will the revolution in video entertainment.

You won’t get much warning, if past precedent holds. Like water turning to ice, or to steam, nothing much seems to happen, right before the structure changes dramatically.

Edited by Alisen Downey

Contributing Editor

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