The Economics of Rate Control (v. 1) (AEI Studies in Telecommunications Deregulation) - Tapa dura

This study of cable rate regulation finds that unregulated monopoly may be superior to regulate monopoly, even in the presence of legal entry barriers. By comparing how rates, quality and volume changed during the periods of deregulation and reregulation in the cable industry, the authors show that cable rate regulation deals with a real problem, monopoly power in local cable markets, but has typically proven perverse in effect. The major challenge in regulating cable rates is that for whatever price level is set, cable operators may respond in countless ways - shifting their offerings, their investments, the price they demand for unregulated programming, and their marketing strategies in subtle ways. Hazlett and Spitzer argue that the net impact of regulation has been negative - increasing transaction costs and encouraging rent-seeking behaviour - so that rate regulation is ineffectual as a consumer protection policy in cable television markets. "Public Policy Towards Cable Television" is the first part of a two-volume analysis of cable rates. The second volume, "Regulation and the First Amendment", will emphasize legal analysis.