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News Release
April 17, 2003
CONTACT: David Fish
(202) 289-8928

Don’t Bust Cable’s Broadband Bundling
May Calls Consumer Groups' Pleas for Investigations "Half-Cocked"

WASHINGTON, D.C. - Consumers enjoy better service options and the economy receives a stimulus from increased broadband deployment when cable, telephone, satellite and wireless providers offer competing “bundled” service packages. So why are two prominent consumer lobbies and a U.S. senator griping? Perhaps they haven’t taken the time to fully understand the emerging “digital channel marketplace.” That is the view of one expert who is countering their assertion that cable companies may be violating antitrust laws by offering discounts to customers who order both Internet access and cable television.

Writing for the online publication CNET, Progress & Freedom Foundation Senior Fellow and Director of Communications Policy Studies Randolph J. May says claims by the Consumer Federation of America and Consumers Union that “cable companies are tying TV and Internet service together in order to undermine competition from satellite TV and preserve cable’s market power” and U.S. Senator Barbara Boxer’s assertion that discount packages constitute an “unlawful tying arrangement” are ill-conceived. For such to be the case, a company would have to require the purchase of Internet service as a condition for receiving video channels, or vice versa – something that is not alleged. Furthermore, citing Richard Posner, a federal appeals court judge, May says the objection to tying arrangements is that they, in Posner’s words, “enable a firm having a monopoly in one market to obtain a monopoly in a second market.”

“Despite half-cocked requests asking the government to initiate half-baked investigations, the truth of the matter is that cable companies do not have a monopoly in the multi-channel marketplace,” May writes in The Storm Over Broadband Bundling. Thus, “in this world of increased bandwidth, where ‘a bit is a bit is a bit,’ we would expect to see video, voice, and high-speed Internet access services increasingly bundled together by cable, satellite, telephone and wireless operators. Indeed, the local telephone companies such as Verizon are rolling out bundles of services with great fanfare, including discounts for subscribing to more than one service.” As evidence of the competitive environment, May cites the FCC’s recent study finding that satellite video providers added 18 million subscribers in the previous year – an increase of 14 percent. During the same period, cable subscriptions grew under one percent.

The Progress & Freedom Foundation is a market-oriented think tank that studies the impact of the digital revolution and its implications for public policy. The Foundation is a 501(c)(3) nonprofit organization founded in 1993.



The Progress & Freedom Foundation