THE COMPETITIVE EFFECTS OF A CABLE TELEVISION OPERATOR'S REFUSAL TO CARRY DSL ADVERTISING

Abstract

Many cable television operators routinely refuse to run local DSL advertising on their cable systems. Given that such conduct reduces the advertising profits of cable companies, a plausible purpose for such discriminatory refusals to deal is to limit their cable customers' information about competitive alternatives to their cable modem services. By banning local DSL advertisements placed on cable television, a cable television operator forecloses equally efficient rivals (DSL providers) in the broadband Internet access market from the most efficient form of advertising a broadband product (television advertising), as I prove here, and thereby impairs rivals' efficiency. To the extent that DSL providers cannot compete as effectively as they would in the absence of the ban, the ban allows cable television operators to raise the price of cable modem service and thereby reduce consumer welfare. Using a traditional antitrust analysis, I present evidence that local television advertising can be a separate product market (when it comes to marketing DSL), and that cable television providers have market power in that advertising market. I also present evidence that local television advertising on cable networks is the most efficient form of advertising for DSL providers. The potential anticompetitive effect of cable's ban on DSL advertising is to relegate DSL advertising to less efficient marketing channels, thereby allowing cable operators to charge higher prices for cable modem service. Such conduct thus raises obvious antitrust issues.