[opendtv] Re: Bundling and competition
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: "opendtv@xxxxxxxxxxxxx" <opendtv@xxxxxxxxxxxxx>
- Date: Tue, 10 Sep 2013 10:03:36 -0400
On Sep 9, 2013, at 7:23 PM, "Manfredi, Albert E" <albert.e.manfredi@xxxxxxxxxx>
wrote:
> Craig Birkmaier wrote:
>
>> The phone and cable wires are just that: WIRES.
>
> Yes, but individual households cannot credibly subscribe to any one of a
> large assortment of these utilities. I can choose any number of supermarkets
> I go to, and change the one I deal with as often as I want. Not the same
> thing for water/sewer or wired Internet/telephone service. Not until this
> becomes wireless, anyway. At which point, I would agree, no heavy regulation
> would be needed anymore.
This is the classic definition of an oligopoly (via Wikipedia):
An oligopoly is a market form in which a market or industry is dominated by a
small number of sellers (oligopolists). Oligopolies can result from various
forms of collusion which reduce competition and lead to higher costs for
consumers.
With few sellers, each oligopolist is likely to be aware of the actions of the
others. The decisions of one firm therefore influence and are influenced by the
decisions of other firms. Strategic planning by oligopolists needs to take into
account the likely responses of the other market participants.
Where you do have a choice of service providers - e.g. Telephony and Broadband
- there is no real competition, just "feature wars" to differentiate at
essentially the same price.
By the way, the auto industry is considered to be an oligopoly too - much more
choice, but little "real" price competition. And supermarkets? Gainesville is
dominated by one major chain, Publix, which uses campaign contributions and
legal actions to thwart competition. They effectively blocked competition from
Super WallMarts for more than two decades; even now, the Super WallMarts cannot
sell gasoline, which is typically $0.20/gallon higher than neighboring counties.
And for the record, the wireless telco industry is heavily regulated. They
currently enjoy a highly favorable position with respect to acquiring spectrum
because they can deliver $billions to the politicians and pass the cost on to
subscribers. The TV guys are more than willing to give up spectrum which they
no longer need and have never been willing to pay for, because they can
generate a second revenue stream with the MVPD's acting as "
> As you know, everything I watch is a la carte, so obviously, the situation is
> not so dire. The only question you should be asking is, who is forcing this
> bundling to take place? The content owners? NO PROBLEM. It's their right. The
> MVPDs? Hmm, I would find that problematic, but there's an easy way out - cut
> the cord. The FCC? No, that would be unacceptable.
And some people choose to be vegetarians.
And for the record, the MVPDs came to power based on bundling and subscriber
fees for new channels that were struggling to compete with the broadcast
networks. The broadcasters liked the business model and got the politicians to
give them retrans consent, which in turn has given them control of 90% of the
content on the MVPDs, and the ability to collect subscriber fees from the
"addicts" who gave up their antennas.
> The other way around. What's NOT competitive? As long as a content owner
> decides to make the content available on the Internet, I can get it.
Are used cars competitive with new cars?
There is a market for both. TV content has a long life, being sold and
distributed via a number of distribution technologies. That "new car smell" has
significant value, but the content makes money at every phase of its life. You
continue to ignore the fact that you cannot access some content at all, and are
willing to wait for other content...
Or do you?
> That's what elasticity means, Craig! For instance, I haven't been able to
> follow "Person of Interest," this past year, as FOTI VOD. I guess CBS is
> holding it for MVPDs and FOTA only. Fine. Did I run out and get a
> subscription to Cox? No. I just watched something else.
"Person of Interest" aired on FOTA CBS stations.
Bert must be having problems with his antenna.
> Ditto with CNN. They don't have a live stream FOTA or FOTI. Do I run out and
> subscribe to Cox? Nope. I watch France 24 and others instead. Competition
> means that you don't prevent the other guy from selling a product that
> competes with yours. Elasticity means you investigate alternatives. Addiction
> means you make yourself believe you have no alternatives, when you do.
Tofu burgers are an alternative to steak.
What this all boils down to is personal choice and the perception of value.
I do agree that the oligopolies are pushing the envelope and consumers are
beginning to push back. But the real value of any oligopoly or monopoly lies in
the ability to control the market for something that is high demand. For the
past 20 years the MVPDs have had control of about 85% of the market. They will
still be highly profitable if they only control 50% of the market, and it could
take another decade before they lose that much market share.
Regards
Craig
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