The Political Economy of Cable - "Open Access."

Advocates of "open access" claim that Internet Service Providers (ISPs) should be able to use a cable TV system's bandwidth on the same terms offered to ISPs owned by the cable system. On that view, "open access" mitigates a monopoly bottleneck and encourages the growth of broadband. This paper shows that cable operators do enjoy market power, and do seek to leverage a dominant position in video into the broadband access market by allocating too little bandwidth for Internet access. Yet, rather than protect cable operators from cannibalizing their cable TV revenue, this strategy defends against imposition of common carrier regulation, which would allow system capacity to be appropriated by regulators and rival broadband networks. Ironically, the push for "open access" limits Internet access by encouraging this under-allocation of broadband spectrum, and by introducing coordination problems slowing technology deployment. These effects are empirically evident in the competitive superiority of cable's "closed" platform vis-a-vis "open" DSL networks, and in financial market reactions to key regulatory events and mergers in broadband.