Monday, April 28, 2014

Everything that is wrong with American capitalism, in one headline

Here it is, in the LA Times:

"Comcast, Charter reach $20-billion deal, would swap customers in L.A."

Cable companies Comcast Corp. and Charter Communications have agreed to a $20-billion deal that would exchange subscribers in numerous markets, including Los Angeles, should Comcast prevail in its bid to acquire Time Warner Cable.
Nearly 280,000 homes in Los Angeles that currently receive their cable service from Charter would be affected by provisions of the deal unveiled Monday. 
Those Charter subscribers, in such cities as Long Beach, Malibu, Burbank, Glendale and Alhambra, would eventually become Comcast customers -- perhaps as early as next year.
I'm not sure which is the more shocking, the headline (and the associated story) or the completely blasé and matter-of-fact way in which it is being reported.   This is not the way a free market is supposed to work.  At the risk of stating what should be obvious but apparently isn't, in a free market, the customer is supposed to select the supplier, not the other way around.  Suppliers are not supposed to be able to trade customers as if they were a commodity.  And yet, this is the situation we are in.

Not only is this the situation we are in, but we have somehow gotten here with only the feeblest of protests.  This should be an outrageous situation, but there is no outrage.  There is barely any indication that anyone thinks this situation is even remarkable or noteworthy, let alone outrageous.  And that is truly outrageous.

[UPDATE] A number of commenters have made the point that it's not capitalism that's the problem but politics.  I basically agree with this, and perhaps I should have chosen a different headline.  But the point I was trying to make is not so much about the exact nature of the problem but rather that the Charter/Comcast deal -- and, more to the point, people's (lack of) reaction to it -- is illustrative of the problem.

[UPDATE2] Lively discussion on Hacker News

9 comments:

Benjamin Lankout said...

"in a free market, the customer is supposed to select the supplier, not the other way around"

Oh, but they are. Comcast and Charter have established a customer-supplier relationship; the selection has been made.

You and I are not the customer, we are the product.

When you hear clamoring about "free market," it's for corporations (the "real people"), not you and I.

Unknown said...

Comcast is a public utility, a monopoly created. granted and regulated by the government. It is the near polar opposite of capitalism. Your outrage should be directed at the government bodies that enable this behavior. Capitalism plays virtual no part in this travesty.

Definition of Capitalism: an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.
Definition of Public Utility: public utilities are often natural monopolies because the infrastructure required to produce and deliver a product such as electricity or water is very expensive to build and maintain. As a result, they are often government monopolies, or if privately owned, the sectors are specially regulated by a public utilities commission.

Ron said...

> we are the product

Yes, and that would be OK too if Comcast were paying us instead of the other way around.

Ron said...


> Comcast is a public utility

No, it isn't.

http://wiki.answers.com/Q/Is_Comcast_a_Public_Utility

Giuseppe Miriello said...

I would argue that the cable services market is not a good example of perfect market, but rather an oligopoly.

if this was a perfect market you would have been perfectly spot on in pointing this deal as an example of market failure which is not since the oligopolistic market is working as intended: creating cartels and maximizing their profits!

Capitalism has nothing to do with this issue, poor regulations on an oligopolistic markets are to blame instead.

Owen Griffiths said...

This is not actually as scandalous as you suggest. Customers do choose their providers (from their limited options, that is a different story).

It is entirely common, and not unreasonable to sell going businesses whose only value is their existing customer base. e.g. the owner of a lawn mowing business will typically sell their customer list to someone else when they want to retire. Similarly, my optometrist recently sold his practice, and we became someone else's customer by default.

There will be exactly the same range of options (or lack thereof) before and after this deal.

Unknown said...

Comcast is a public utility: http://www.state.nj.us/bpu/assistance/utility/, http://www.cpuc.ca.gov/puc/, http://www.ct.gov/pura/site/default.asp and many more.

It's common for utilities to have shareholders and be publicly traded, this does not make them part of capitalism. They are government granted monopolies (or semi-monopolies). A simple sanity test for capitalism is to ask yourself if anyone could start a competing business in that space. With few exceptions the answer for cable TV is either no, or not without considerable political pressure. A city or county hands out a "franchise" that bars others from competing. This is why it is common to have only one cable provider (though you maybe able to get service from another another public utility like a telephone). Comcast continues to exist, despite being the most hated company in the US, because competitors are generally barred from entry into their market. It is also why Comcast is one of the biggest campaign contributors around -- to keep the competition out!

WNelson said...

What's your solution? Lay down additional parallel cable lines, or mandate that other companies can use the lines which one company paid for?

Unknown said...

In a free market, companies find a solution -- they might lease another's lines, lay their own, or band together with other entities to share expenses. Places where the govern doesn't regulate/prohibit this sort of thing, routinely see very high bandwidth connections at rock bottom prices.

Look at what happens when Google thinks about laying fiber in some selected city -- the existing franchise owners attempt to derail the effort politically, and if that fails they suddenly drop prices and increase speeds: http://www.wired.com/2013/04/what-atts-follow-me-fiber-move-says-about-broadband-competition/
Hours after Google announced Google Fiber in Austin — the second city in which Google Fiber will be rolled out — AT&T pretended it, too, will build a 1-gigabit network there.

My original point was it's crazy to blame capitalism for the corrupt behaviors of the state. For some reason people do this routinely.