Common Carrier Video Delivery by Telephone Companies

Much debate surrounds the question of whether to allow telephone companies to deliver video services to subscribers in their service areas. Such an arrangement would raise issues about whether telephone companies should operate as video common carriers, entities free to supply video services as cable operators do today, or hybrids that combine common carrier services with the carrier maintaining limited ownership interests in programming. Setting aside a complex set of legal considerations, this study evaluates the relative merits of these alternative ways to provide video services. The author assesses the appropriate role of government rate regulation (e.g., rate-of-return constraints or price caps) of video networks owned by local exchange carriers (LECs), and explores the applicability of common carriage, going beyond the LECs, to cable operators and other video providers. Outcomes are evaluated in terms of their contribution to economic efficiency and information diversity. The author concludes that there is no sound basis for singling out the telephone companies for common carrier treatment if they choose to enter the video market. He suggests that the same treatment be accorded telephone companies and cable operators, regardless of whether they operate as video common carriers, hybrids, or unconstrained carriers.