Add Prof. Connie Book (Elon University) to the list of academics who can be counted on to find an atoll of failure in an ocean of success.
Professor Book has released a paper that takes a look at Texas’ 2006 groundbreaking video franchise reform legislation, and she doesn’t like what she sees.
But first consider what Prof. Book grants in her paper:
- Broadband deployment has happened at a breakneck pace since passage of the legislation;
- Smaller companies are able to enter the market faster;
- Cable companies have lowered costs in communities with new competition;
- New investment and job creation is evident;
- Consumers have access to more products and services;
- Polled citizens favor the new competition;
- Most municipalities surveyed described “complaint to be relatively quiet,” and described the transition as relatively seamless, with two reporting “positive consumer reaction to choice and lower prices”; and
- Most communities described complaint calls as “light to minimal.”
Sounds like a success to us. Perhaps that’s why over 20 states passed video franchise reform after Texas blazed the trail (pardon our pride).
Nevertheless, Prof. Book doesn’t like the reform.
Why? Because Verizon first rolled out its FiOS service in North Texas, where incomes are higher than the overall Texas average.
(She’s also not happy about the local access television provisions, but we bet even she never watches those channels, either.)
Our first response is to simply point out that North Texas is in Verizon’s market. This is a geographic relic of the regional Bell operating system, where GTE (now Verizon) covered North Texas, and SBC (now AT&T) mostly covered South and West Texas.
But our second response is: Doesn’t every company locate and market its goods and services convenient to those customers most likely to buy them?
Isn’t this just part of economic reality?
Most importantly, early adopters actually subsidize later adopters in every area of technology. When a technology is new, when it is still being initially deployed, that is when costs are highest and thus prices are highest. The later adopters of any technology end up paying less, in part because the early adopters have subsidized the initial development and deployment of the new technology.
As the rollout expands, gaining a greater number of subscribers, the cost of provision per subscriber generally goes down, as do the commensurate subscription costs, therefore making the service available to yet a broader pool of consumers.
The original cost of cellular phones – the old brick sized analog behemoths -- was about $3,000 in the early '80s in non-inflation adjusted real dollars. Only higher socio-economic consumers could afford the service. Yet, today we are bombarded with ads for free mobile phones or two-for-one offers at $49.95 per unit.
As the broadband deployment continues, the costs of infrastructure investment will go down, and the deployment of new services and packages will expand. Consumers will constantly have access to more and more for less.
Video franchise reform in Texas has enhanced video competition and accelerated broadband rollout. Perhaps a little more time in Texas, and a little less time in the ivory tower, would improve Prof. Book's perspective.
And everyone else's for that matter.