Archive for January 13th, 2010

Did you see this AP article from Wednesday?

It’s great news.  The Obama administration is signaling that it supports ending the antitrust exemption enjoyed by health insurers.  (Here’s a NYT blog post explaining the issue.)

Right now, only health insurance companies and Major League Baseball are protected from federal antitrust enforcement.  There’s been enormous consolidation in the health insurance industry, costs are surging four times faster than wages (more than doubling in the last nine years), and 94% of insurance markets in the United States are now highly concentrated.

So why protect these players from federal laws prohibiting collusion, bid-rigging, and market allocation?  It’s hard to come up with any sensible reason to keep this exemption in place.  Some key Senators think so too.

I’ve got some questions about content.

Growth in the use of communications networks comes from social interactions.  We saw this when the telephone was launched.  It seems to be connectivity, not content, that people crave.

But access to highly-desirable content is also extraordinarily valuable to consumers.  According to CNN, the average cable bill is now about $75/month.

We’re facing some complex questions that have important consequences for the future of connectivity:

1.  Let’s assume highly-desirable content moves solidly to cable.  Broadcast viewers have already migrated to cable in droves.  The pending Comcast/NBCU merger has implications for 1/5 of TV viewing hours in the US, and NBCU controls about a third of Hulu.com.  Even if some existing NBC broadcast programming remains available over the air, and even if some other broadcasters choose to make content available online independently of Hulu, the real content game will be subject to a cable subscription.  Instead of paying NBC directly for a la carte online material (one possible future) you’ll be paying a cable system or other network access provider (the other possible future).

2.  Let’s assume cable systems inextricably bundle high-speed Internet access connectivity with cable subscriptions – and sweeten the pot by making exclusive deals for content that is only accessible online to people who subscribe to the cable system.  See Comcast Fancast Xfinity TV.

Given these two reasonable assumptions, what happens to Internet TV?  Cable is obligated by temporary “program access” rules to allow other “multichannel video programming distributors” access to popular programming.  But municipal fiber systems providing basic connectivity, say, or other independent network access providers, aren’t necessarily “multichannel video programming distributors.”  (And the program access rules mostly apply only to programming delivered to cable systems by satellite, not by fiber.)

• Can Internet TV – let’s assume separate online distributors for which users pay for access, like iTunes – compete with the material behind the cable systems’ pay walls if the Internet TV sites don’t have access to highly-desirable content?
• If Internet TV can’t compete, and if unbundled programming isn’t available online, does that mean competition will never constrain Americans’ multi-tiered cable bills?
• If OTA TV is a thing of the past, why wouldn’t it be good for consumers for Internet TV to do well?
• If Internet TV can’t compete, does that mean high-speed Internet access becomes less desirable to the 99% of Americans with TVs?
• If high-speed Internet access isn’t desirable, and isn’t unbundled, what happens to the competitive pressure the Internet imposes on so many incumbent industries?

Drop me a line and tell me what questions you would ask.