Competition is supposed to improve consumer welfare by driving prices lower. Perhaps oddly, that does not necessarily seem to be the case for entertainment video prices.
Over the 12 months ending January 1, 2010, the average price of expanded basic service increased by 3.2 percent, to $54.27, for those operators serving communities for which no effective competition finding was made as of January 1, 2010 (noncompetitive communities), the Federal Communications Commission reports.
For the effective competition communities, the average price of expanded basic increased by 4.6 percent, to $54.77, the FCC study suggests. “What?” you might be thinking. Prices rose more in the competitive markets than in the non-competitive markets.
Of course, it always is difficult to measure “productivity” or “value” for products whose characteristics change over time.
Over the study period, price per channel declined by 6.1 percent in non-competitive communities, to 58 cents per channel, and by 10 percent in effective competition communities, to 51 cents per channel.
Nominal prices, in other words, do not capture the enhanced value provided the added channels.
The price per channel is 12.3 percent lower in effective competition communities than in non-competitive communities, which reflects that operators in effective competition communities carry more channels on expanded basic service than in non-competitive communities.