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The Obama administration has a plan to lower your cable bill

President Obama Welcomes Wounded Warrior Ride To The White House Photo by Mark Wilson/Getty Images

These days, if you want to get full-featured cable or satellite television, you typically need to pay not just for the television service itself but for a rented set-top box from your television provider. This is an easy and lucrative stream of revenue for cable and telecom companies, with consumers paying an average of $230 a year in rental fees for relatively unsophisticated boxes.

The Obama administration wants to change that, and will at 9 am release a formal request that the Federal Communications Commission require pay television providers to open up that market to competition. They're not asking for any particular technical solution, but they want an enforceable guarantee that there will be some way for third parties to make and sell cable boxes.

They anticipate that this will save consumers money. But more importantly, if it happens it will turn a stagnant element of the electronics landscape into an innovative one. Future iterations of the Xbox, Playstation, Roku, Apple TV, or other integrated media streamers could serve as complete substitutes for cable boxes. Or maybe ultra-cheap low-feature boxes will emerge to serve customers who really just want a traditional linear cable experience.

At the same time, President Obama will unveil an executive order that tries to ensure more regulatory actions in this spirit — giving every executive agency a 60-day deadline to do a top-to-bottom review of the areas it supervises and report back on what it can do to break down barriers to competition in the American economy.

Competition appears to be on the decline

Set-top boxes are one micro-scale example of a problem that has increasingly become a macro-scale concern for Obama's economic team: evidence that the American economy has become less competitive and more ridden with monopoly market power.

The big-picture concern is that corporate profits have risen to an unusually high level as a share of total national income, and then stayed high. Profits are, of course, an integral part of a capitalist economy. But in a healthy capitalist economy the idea is that high profits inspire businesses to invest more in order to capture a share of the profits for themselves. That investment creates jobs and innovation, and leads to competition that whittles away the profits.

In recent years, we've seen the profits but not the investment.

Some analysts blame activist investors on Wall Street for the investment drought but a dearth of competition is another plausible suspect. There's evidence that fewer new companies are being founded and many industries are becoming more concentrated — both signs of declining concentration.

Competition policy beyond antitrust

When the conversation turns to competition policy, it's natural to think of anti-trust enforcement as practiced by the Department of Justice and the Federal Trade Commission.

The White House is interested in that, but it also thinks that reviews of merger and acquisition activity only get you so far in terms of genuinely driving competition.

FCC activism around set-top boxes is a case in point. Breaking Verizon or Comcast into multiple smaller companies wouldn't do anything to change the fact that most consumers only have access to one or two pay-television providers, all of whom require set-top box leasing. Introducing competition into that market requires direct regulatory intervention — just as the administration earlier acted to mandate that wireless carriers allow consumers to "unlock" their smartphones.

Air travel is another example where the Transportation Department may have to look not just at the scale of airlines as a whole, but the allocation of slots at particular airports.

But there are also cases where too much regulation may be standing in the way of competition. Obama's economic team has previously taken aim at occupational licensing rules that set up de facto cartels in the provision of certain kinds of services. There's also increasing concern that even when several companies operate in the same industry they may have so many common shareholders that they are subtly pressured to avoid competing.

The internet also appears to have spawned several opportunities for companies to obtain market power via network effects — everyone uses Facebook in part because everyone else uses Facebook, making them very hard to dislodge — with implications that policymakers have not yet fully understood.

A quacking duck

Set-top boxes are a small thing, and completely reinvigorating competition in the American economy is probably too big a thing to be achieved with an executive order.

But like the administration's springtime crackdown on the banking industry, the competition initiative is a sign of a White House that is fiercely resisting the lame-duck label and trying to put its stamp on national policy. The order says, in effect, that the president wants his appointees to hurry up and see what they can still get done before they have to leave office.

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