Consumer welfare of the state-level franchising processes for multi-channel video programming distributors

Abstract

Internet protocol television (IPTV) that telecom carriers convey has recently appeared as a competitor of cable television service in the multi-channel video programming distributor (MVPD) market. A carrier must be granted franchise for multi-channel video programs from the local government in the US, which becomes an issue for delaying service launching, hampering fair competition, and leading to inefficient resource allocation of carriers. Therefore, a state-level franchising process has been suggested as an alternative to shorten the launching period, to improve competition in the MVPD market, and as a result, to increase consumer welfare. In this regard, this study proposes a new approach to estimate the gain in consumer welfare from changing the MVPD franchising mechanism from local-level to state-level. Results show that the state-level process will grant a gain in consumer welfare ranging from $1.8 to $3.1 billion dollars for ten years. This result should encourage regulators and legislators to consider a state-level process as a viable option for improving competition in the MVPD, as this change will increase consumer welfare.