NEW YORK (Reuters Blogs) -- Tyler Cowen isn't worried about the cable companies' broadband monopoly. His argument, in a nutshell: if you can't afford broadband, that's not the end of the world: You can always go to the public library, or order DVDs by mail from Netflix. And if the cable companies' broadband price is very high, then that just increases the amount of money that alternative broadband providers can potentially make in this "extremely dynamic market sector." Indeed, he says, if regulators were to force cable companies to decrease their prices, then that would only serve to decrease the amount of money that a competitor could make, and thereby lengthen the amount of time it will take "to reach a more competitive equilibrium".
The first big thing that Cowen misses here is television. Cowen knows that there's more to broadband than watching movies on Netflix, but what he doesn't really grok is that there's more to Netflix than watching movies on Netflix. Netflix has moved away from the movies model (which was a constraint of the DVDs-by-mail model) to a TV model. And that makes sense, because Americans really love their TV. They love it so much that cable-TV penetration is still substantially higher than broadband penetration. As a result, any new broadband company will not be competing against the standalone cost of broadband from the cable operators: instead, they will be competing against the marginal extra cost of broadband from the cable company, for people who already have - and won't give up -- their cable TV.