^{Democracy & Technology Blog} Cable Rate Increases Smallest in Years

The Wall Street Journal reports that cable rate increases are going to be the “most moderate in years.” The main reason: Verizon and AT&T are getting into video despite the opposition of politicians who want to raise taxes or fees and impose new layers of regulation.

… cable companies that are facing the early waves of phone-company competition are showing the most restraint in raising prices. Cablevision, for example, which is facing threats from Verizon in much of its turf, has some of the lowest price increases in the business.

Cablevision believes that its strategy of low price increases is responsible for a “surge” in revenue. This isn’t very surprising. As the price of anything falls, demand rises. However, there are many regulatory enthusiasts who are under the impression that broadband is what economists call “inelastic,” meaning that consumers don’t care what it costs — they’ll buy it anyway. The Cablevision experience shows that isn’t so. The implication is that anything which raises the cost of broadband — such as taxes or fees and regulation — will reduce consumption of broadband.