Comcast’s well-documented history of contemptuous treatment of its customers reportedly is coming back to haunt it in its quest for approval of a merger with Time-Warner.
Gee, isn’t karma a female dog?
Unfortunately, little of the public discussion goes beyond the firm’s often outrageous treatment of subscribers, both in terms of quality of service and in resistance to people who simply want to stop buying the product it offers. Its tawdry reputation overshadows the broader issue of the degree to which we have simply abandoned anti-trust as a legitimate function of government. That is unfortunate from the point of view of efficiency in our economy as well as in fairness in consumer-level commerce.
Start with the micro- economics basics. British economist Adam Smith demonstrated that markets often function very well in transforming raw resources into the goods and services that meet the needs and wants of society. But he was equally astute in describing how businesses have inherent incentives to collude to further their own financial position to the detriment of their customers. Competition forces each butcher or baker, taken alone, to strive to meet customer needs. But if all the butchers or all the bakers or all the media companies can get together and act as a monopoly, those incentives for customer service break down. The outcome is waste of resources and not just unfairness.
Later economists lauded the virtues of free markets but detailed specific circumstances in which market competition can fail. These include an insufficient number of competing firms, high “barriers to entry” into the business sector and an imbalance in either the information available or bargaining power of the two sides in some sale-purchase situation. All of these apply in cable communications.
Real-world responses to economic harm from monopolies began before the economic theory was in place. Regulation of railroad fares and conditions of service began in the 1880s.
The Sherman Anti-Trust Act that banned “any combination in restraint of trade” established federal authority to limit monopolistic practices more broadly, and many loopholes in it were plugged by the Clayton Act of 1914. States established utility regulatory commissions. So a regulatory framework is in place. What increasingly is lacking is the political will to use it when the gains to society from doing so outweigh the costs.
There is the rub. Decades of regulating transportation rates and scrutinizing even small mergers demonstrated that government can easily do far too much in efforts to limit monopoly. Perverse incentives arose frequently. Regulated industries “captured” regulators or used regulation as a means of freezing out new competitors.
Regulation could create barriers to entry instead of demolishing them. Economists and legal scholars, notably Judge Richard Posner, detailed all this in scholarly terms.
So the deregulatory efforts of the Carter Administration were laudable, as was the earlier, largely court-ordered restructuring and partial deregulation of telecommunications. These advanced economic efficiency and inspired technical and managerial innovation in the sectors concerned.
However, recognizing that monopoly regulation can have costs as well as benefits is not the same as abandoning such regulation altogether. Yet, that is what effectively has happened at the federal level. Over the past 25 years, in sector after sector, from airlines to pharmaceuticals to telecommunications and media to banking, the Justice Department has turned a blind eye to mergers that any administration, Republican or Democrat, would have challenged in the 1960s or 1970s. The fact that anti-trust actions were too nit-picking in the past does not mean that the entire issue should be abandoned now.
Comcast’s bad treatment of its subscribers is legendary and is now cited as a lever by opponents of the merger. The two issues are separate, however. State and local government have the ability to force cable operators to provide good service; it just requires the political will do so.
On the specific problem of Comcast forcing its subscribers to run a hostile bureaucratic gauntlet to simply stop service, legislatures need to man up. There is no reason a state could not enact a law stating that any retail customer desiring to stop buying any subscription service, including cable or other telecommunicaations, be able to do so with a simple notification and that hard-sell harassment tactics are simply illegal and subject to stiff fines.
Yes, Comcast has often made pious vows to regulators that it would end abuses and improve service, only to ignore such promises once the ink dried. Hefty lobbying and political contributions have allowed it to get away with murder in the past. But if citizens justifiably want it tamed and elected officials hear them, the task can be done.