Rent-Seeking and Cable Boxes

The Federal Communication Commission (FCC) voted in February for a tentative proposal that would essentially allow third party programmers to provide cable services that currently only companies like Comcast and Time Warner can. The FCC ruled that cable companies must build apps that can be used in other devices, like an AppleTV or Tivo, allowing a choice for customers instead of having to rent a set-top box to access cable. Proponents of this plan argue that allowing more producers would promote competition in the cable TV industry.

According to the rent-seeking model that we have discussed in class, the current cable companies like Comcast and Time Warner will be willing to spend almost all of the rent that they earn from having control over the cable industry lobbying the government, or in this case, the FCC, to maintain the current standards that allow them to be the only suppliers of cable TV. In relation to Stigler, the current cable companies are lobbying to maintain their ability to control the entry of new rivals in the industry. It is not the rent that these companies earn that is the issue, but instead it is the rent-seeking efforts where resources, like labor, are inefficiently used: the resources are being taken away from production and are instead used to lobby the government to allow them to keep earning these rents.