Working toward a new U.S. competition policy

If you’ve ever moved or switched cable providers, or simply cut the cable cord altogether, you’ve had to physically return your cable box—and you’ve probably wondered why each provider had a specialized box. Or maybe you’ve looked at your cable bill and wondered why you’re paying to rent the box in addition to getting the services. If you can get cable from any provider with any TV you’d like, why can’t you have a third-party cable box that works with any provider, even Netflix or HBO NOW?

Well, cable providers certainly don’t want that to happen. New innovation from a third party would cut into the nice little economic rent they’ve created for themselves. And it’s that outcome—the cutting off of potential innovation by incumbent firms—and others that are at the heart of steps that President Obama and his Administration are taking to put a new emphasis on competition policy in the United States.

The first, most concrete step is that the Administration will urge the Federal Communications Commission to push forward on efforts to “unlock the cable box.” The hope is that opening up the space for potential entrants by preempting the use of market power will introduce choice and competition into the set-top box market.

But the lack of competition and rise in market power isn’t confined to the cable industry. As Jeffrey Zients, Director of the National Economic Council, and Jason Furman, Chairman of the Council of Economic Advisers, put it, the Administration weighing in on the FCC rule is a “mascot” for a broader look at how policy can help promote competition in the United States.

Via an executive action, the President is having federal departments and agencies look at how they can help increase competition. But it’s not just the traditional antitrust authorities that need to be concerned about market power and concentration. Consider the example of non-compete agreements and occupational licensing—areas of labor market policy that are all about competition and that the Obama administration has previously highlighted.

It’s also worth thinking about competition policy as not just traditional antitrust, even though there is a strong case to be made that enforcement of antitrust laws can and should be better. Consider the rise of firms like Facebook, Inc., whose business model depends upon network effects to give them market power. But that power is intrinsic to that kind of firm. What can policymakers do there?

Or consider the idea that increased common ownership of competitors via mutual funds reduces competition—a possibility that interestingly gets a shout-out in a new Council of Economic Advisers brief on competition issues. Does policy attack the deep sources of the increased market power? Or does it merely work to constrict its use?

These questions are even more important as the research isn’t entirely there on the relative importance of issues like these or even the best ways to go after them, if we should at all. The picture isn’t so clear right now—but perhaps it will get clearer if policymakers and researchers keep trying to tune in.