Policy Analysis No. 34

Cable Television: An Unnatural Monopoly

By Clint Bolick
March 13, 1984

Executive Summary

The invention of print…made it easier to manipulate public opinion, and the film and the radio carried the process further. With the development of television, and the technical advance which it made possible…the possibility of enforcing not only complete obedience to the will of the state, but complete uniformity of opinion on all subjects, now existed for the first time.
—George Orwell, 1984

It is 1984. Many of the more horrific Orwellian prophecies fortunately have not come to pass. Nonetheless, ours is an enlarged government, taking unto itself increasing functions that were once left to voluntary interaction among individuals.

In tribute to Orwell’s book, consider the following scenario, which, if it occurred, could sow the seeds for the world he envisioned. In this scenario, our benevolent city fathers, concerned about the trend toward one-newspaper cities, decide that the increasingly monopolistic tendencies of newspapers in local markets necessitate governmental action to protect the public interest. Assuming that newspapers are natural monopolies, the city must act to protect consumers against such inevitable effects as price gouging, one-sided news, and lack of public access to the medium. Because newspaper boxes, trucks, and carriers use the city streets, the local government concludes that it has jurisdiction to take whatever action it deems necessary.

The city quickly realizes that if it supplants the marketplace and controls the mechanism that determines which company will enjoy the local news monopoly, it can extract enormous concessions in return from that company. It promotes an intense bidding war for the franchise, the winner of which must be not only wealthy enough to meet the costly requirements demanded by the city but possessed of sufficient political know-how to appeal to the city’s decision makers as well.

The competition is fierce. Each bidder spends $1 million to curry favor with the city, staging media events, gathering support from prominent community figures, and wining and dining the decision makers. Finally a winner is chosen to serve the community.

The franchise does not come cheaply, for the winning bidder must pay millions of dollars in tribute to the city, both now at the outset and then throughout the life of the franchise. And for the first time in U. S. history, a newspaper must cede editorial control to government officials. It must publish verbatim transcripts of all city council meetings, make available and relinquish content control over access pages for specified special-interest groups, and provide training centers to teach people how to write newspaper articles. Any changes in the initial editorial format are subject to city approval, as are transfers of newspaper ownership. Free newspapers must be delivered to all city offices. The price of the newspaper — 22 percent higher than before owing to the costly giveaways — is controlled by the city as well. The newspaper is guaranteed a minimum rate of return. The primary quid pro quo, however, is a guarantee from the city that the newspaper will be insulated from all competition for at least 15 years.

Of course, we know that this scenario is ludicrous. It would shock our consciences to allow government control of our newspapers to this extent. Our Constitution, through the First Amendment, forbids government interference with the press; it entrusts regulation of the press to the marketplace and allows the people to determine their own interest. As Thomas Jefferson explained, in the area of information exchange, it is “better to trust the public judgment, rather than the magistrate…And hitherto the public has performed that office with wonderful correctness.”

Aside from constitutional prohibitions against government interference with the free flow of information, this scenario is also improbable because of its faulty economic premises. We know that newspapers are not natural monopolies. In many communities, two or more daily newspapers thrive. Even in one-newspaper cities, competition is provided by small specialized newspapers and by alternative media. Free entry into newspaper markets furnishes omnipresent competitive pressures. And technology has made possible national daily newspapers that provide competition throughout the country. Far from constituting a natural monopoly, the news industry is vigorously competitive, offering diverse sources of information as a by-product of our commitment to a free market in the area of information exchange.

However, while wholesale government control over the press doubtless would cause public outrage, we have hardly blinked an eye over the application of such an Orwellian scenario to the newspaper of the future — cable television. This dynamic medium has been subject to the most pervasive regulation at every level of government of any medium in American communications history. Yet no stronger economic rationale exists for government regulation of cable than of newspapers. Given our metamorphosis from print to electronic media as the mainstay of our information society, the implications of continued government control over cable are ominous indeed. As Ithiel de Sola Pool has declared, “The issue of the handling of the electronic media is the salient free speech problem for this decade.”[1]

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Clint Bolick is an attorney specializing in constitutional litigation with Mountain States Legal Foundation in Denver, where he is counsel of record in a legal challenge to municipal authority to award monopoly cable franchises.