Comcast~ No fun for anyone

         Comcast, the main entertainment provider for millions nation wide, is a major monopoly. It under produces it services, (not enough HD channels) and over charges for them (PPV cost way too much). Unfortunately for many, there are few if any affordable substitutions for Comcast, hence its monopolistic power.

But how did it become a monopoly? There are a couple of different reasons. For one, in order to have a functioning cable network, miles and miles of lines must be laid and acres of land must be acquired. This creates a very high fixed cost. All of these lines and transformers need to be constantly monitored and maintained, which dictates the need for many employees, adding to the already growing variable cost. Once the cable infrastructure is in place, it would be impossible to enter the cable tv market in the same area. Doing so would require running a second set of wires to each and every house for which there is no land for because Comcast is already using all of it. And let us not forget the most important thing that allows Comcast to have its monopoly, the government sanction. Through licenses and other law and legislation, the government has basically not only allowed this monopoly to occur, but it protects it as well, as long as Comcast keeps the tax money flowing. 

So what are the perks of being a media monopoly? Lets start with the one that is most intrusive into our lives (and more specifically our pocket book). Comcast gets to charge whatever price they want for their services, as long as the demand curve allows it. This allows for maximum profit gain. For example, their profits were up by 38% in the third quarter of 2008. (www.variety.com/article/VR1117994870.html?categoryId=18).

Not only do they get to charge the highest price possible, but they also under produce by not having enough HD channels. This, as a result, creates a lot of dead weight loss, which in this case manifests itself as wasted money and people with dish (if they can afford it) or antennas. As in any monopoly, price discrimination can fix this problem. Comcast does this in many ways, charging different prices to different regions, different packages that are available, and the promotional bundle of phone, Internet, and cable (all scratchier, slower, and blurrier then they need to be). By doing this they eliminate deadweight loss and consumer surplus while increasing their customer base as well as producer surplus. But there is one perk that Comcast does not get to enjoy. Since Comcast is not a complete monopoly (i.e. dish and fios), they still need to invest in minimal advertisement to prevent people from switching to cable alternatives, such as dish. But in the end, Comcast is still pretty much a monopoly because it continues to show the characteristics of one (i.e. high fixed cost, over charge/under produce, price discrimination). Additionally, most people cannot afford dish.