President Obama is beginning to take initiative to work more closely with the SEC in order to help the American consumer and increase innovations The president states that America's long history of innovation and its free market are what has made it such a successful economic nation. His latest stab at corporate America may actually help it in the long run.
Prior to the deregulation of the telephone industry, consumers actually rented telephones from telecommunication providers and they were only limited to the bell companies that serviced their area in particular. After deregulation, infrastructures of different companies increased and consumers were free to choose between providers.
In its early stages, Obama's executive order will seek to deregulate many consumer goods and sevices including cable television. Consumers will have an opportunity to purchase a cable box, and then purchase services from a number of providers as opposed to the current state where the box is rented in many cases under contract with the promise of purchasing services for a set period. This allows industries to price fix and become unnaturally profitable - in many cases because of actions taken through mergers approved by the SEC in years past.
Who will be affected by these executive actions? I would state that those affected would include large players in the television industry including Time Warner, Comcast, and AT&T. I could also see a positive impact for consumer electronics producers such as Sony, Apple, and Samsung, because they will be able to use their comparative advantage in marketing in order to sell the new "free market entertainment centers " to consumers as opposed to the current companies whose marketing presence is in the B2B world. (I don't even know who manufactures my cable box at home - maybe Motorola?)
Source:
http://finance.yahoo.com/news/obama-war-on-business-trump-free-trade-sanders-big-banksr-on-business-172458948.html
I found this article to be very informative and interesting. I think that the deregulation of companies will end up benefiting consumers dramatically. Unless companies that produce cable boxes end up taking advantage of the situation, which is also quite likely. Making cable companies compete more should allow for lower prices that will increase consumer surplus. In addition, innovation with cable may become more prevalent as companies that produce boxes end up competing with each other.
ReplyDeleteI could definitely see this deregulation resulting in a new market for cable boxes - it will be similar to our cell phones. If somebody told when I bought my iPhone 4 as a freshman in high school, that one day I would pay almost $500 outright for a similar product five years down the line, I would have thought they were crazy. Now, consumers hold the phone and service providers scrounge up customers that have high mobility all of a sudden. The two-year contract is a thing of the past. The new boxes will have to be appealing to consumers so companies like Apple will begin innovating and developing products to meet the demands of cable companies and consumers alike.
DeleteI could definitely see this deregulation resulting in a new market for cable boxes - it will be similar to our cell phones. If somebody told when I bought my iPhone 4 as a freshman in high school, that one day I would pay almost $500 outright for a similar product five years down the line, I would have thought they were crazy. Now, consumers hold the phone and service providers scrounge up customers that have high mobility all of a sudden. The two-year contract is a thing of the past. The new boxes will have to be appealing to consumers so companies like Apple will begin innovating and developing products to meet the demands of cable companies and consumers alike.
DeleteYeah, current setup with cable, internet and phone companies is outdated. By opening up the market it will be curious to see what companies will come up with to best accommodate customers. I know many people don't use land-lines anymore and are selective about certain networks they watch, making a whole cable plan not worth the price.
ReplyDeleteLast year, a COO from national geographic spoke on behalf of her business and about the changing cable industry. She talked about the low innovation of cable companies and the actions of companies like Netflix and Hulu that are turning cable obsolete. She suggested that cable subscriptions will dwindle and effectively diminish her business if the industry does not innovate. National Geographic relies on consumer upgrades because it is considered to be a premium channel. I wonder if new competitiveness in the industry will make premium channels such as National Geographic more affordable or lead them to become obsolete due to increased options with cable packages for consumers.
DeleteI don't see what Obama was trying to accomplish politically by saying this. Perhaps he just want to give a pep talk to America to hopefully increase GDP growth after his time in office. Regardless, I don't think America is any less innovative inits free market. Technology is the key to innovation and we may be immune to its progress and allure. It could be argued that We just don't think America is as innovative as it was. I don't think Obama's words will have any impact on the market as a whole. Companies know they have to innovate to stay competitive. They didn't need a President to teach them that.
ReplyDeleteI would agree with your statement Rob, however during his time in office, the SEC has approved many mergers that could definitely be perceived as highly anti-competitive. As we both know, when a firm begins operating in a monopoly, its overall productivity and output in the economy will shrink. I have failed to understand many actions by this president (and many others as well as the hopefuls), however it seems as though he is trying to undo some of the mergers that recently occurred. For example - the AT&T and DirecTV merger, several airline mergers, pharma, the list goes on. It is my opinion that regulators have been asleep at the wheel - maybe it was in the best interest of their friends on main street (or Park Avenue).
DeleteI would agree with your statement Rob, however during his time in office, the SEC has approved many mergers that could definitely be perceived as highly anti-competitive. As we both know, when a firm begins operating in a monopoly, its overall productivity and output in the economy will shrink. I have failed to understand many actions by this president (and many others as well as the hopefuls), however it seems as though he is trying to undo some of the mergers that recently occurred. For example - the AT&T and DirecTV merger, several airline mergers, pharma, the list goes on. It is my opinion that regulators have been asleep at the wheel - maybe it was in the best interest of their friends on main street (or Park Avenue).
DeleteI see this being beneficial to the consumer if they deregulate the industry because it may make things cheaper to purchase but if for example cable company takes advantage of the consumer they could always just jack the price up of the box to overcome that they cant lock you into a set contract.
ReplyDeleteThis has potential to become beneficial to the consumer, however television service is a discretionary good. The providers know that the consumers are willing to pay a hefty amount for services, and in the end they will likely still pay these same amounts or similar amounts but only in a different form.
DeleteFor instance, you could potentially pay the difference in price in the form of a purchase of a top-box. The top-box could become the next tech sensation along with the iphone - Apple could enter production and we will see another generation of Apple TV.