A La Carte cable

November 28, 2007

At Population Statistic, CT talks about the revived idea of forcing cable companies to sell access to individual cable channels rather than a large package of cable channels, a plan often called a la carte. We’ve only been asking for this for decades, but cable companies — secure in their local monopolies — haven’t seen fit to give it to us. Now there’s more talk about forcing them to.

The reason is that unmoored from the cable bundle, individual networks would have to charge vastly more money per subscriber. Under the current system, in which cable companies like Comcast pay the networks for carriage — and then pass on the cost to their customers — networks get to charge on the basis of everyone who subscribes to cable television, whether they watch the network or not. The system has the effect of generating more money than a network “deserves” based purely on viewership. Networks also get to charge more for advertising than they would if they were not part of the bundle.

In other words, the per-subscriber fee the stations charge the cable companies has roughly the same affect as a subsidy. Customers pay for services that they don’t want. And the cable companies also get to charge more to their advertisers, in effect charging advertisers for an audience they won’t reach. With this kind of artificially inflated income, stations don’t have to be as responsive to their customers (advertisers or viewers) as they might otherwise be, an environment which has no doubt contributed to the fifty-billion-channels-and-nothing-on syndrome.

The cable companies get something out of this too: when they add channels to a bundle, they increase the price of the bundle. So they can pick up lots of channels with very narrow audiences — the all-bowling channel, perhaps, or the virtual fireplace channel — add them to the basic package, and then boost the price. During the years I participated in the cable television scam, many stations were added to my plan, raising my prices significantly. And yet, I never watched much more than Discovery, History, Comedy Central, and Sci-Fi.

The boogy-man in this fight is higher prices for consumers. The cable companies are trying to convince us that we don’t want choice because it will drive up our prices any more. I remember years ago when they said deregulation would pull prices down, but that hasn’t happened. We just moved from a regulated monopoly to an unregulated monopoly in most circumstances. A monopoly that’s been leveraged for undeserved income for both cable companies and broadcasters, encouraging bad business practices and insulating both industries from marketplace pressures. Re-regulation would be the greatest boon to innovation and capitalism in decades.

Posted in Infrastructure, Politics, Technology