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Your Cable Company Also Rents You a Cable Box? Sue 'Em!

what TimeWarner offersTime Warner Cable is getting slapped with an anti-tying lawsuit. The plaintiff claims that by renting him a cable box, the company engaged in unfair trade practices. He acknowledges that he could have instead rented a CableCARD and used his own cable box, but claims it was too difficult.

But tying arrangements are good for consumers. They allow cable companies to offer packages that customers want (after all, if I'm buying cable service, I probably want a box too) at lower prices than they'd be able to provide a la carte. That's because bundling provides revenue predictability. It's the same reason you can get combination platters at restaurants for less than each a la carte item added together - and the same reason a dozen eggs costs less than two half-dozens.

Now, I will admit that perhaps the same analysis does not apply wholesale to cable companies, who are often government-granted monopolies. But the correct solution to this problem is not more regulation, but rather to eliminate the anti-competitive franchise system.

For more details, stay tuned to TLF for Ryan Radia's upcoming post on the subject.