This past week there was a story over at NAB365 called FCC Chief Slams Cable Rates. If you are like me you have a very expensive monthly cable bill that has done nothing but go up and up over the last few years while only providing marginally better service. FCC Chief Kevin Martin said this;
“Today, consumers pay double what they paid less than a decade ago and they have fewer choices, not more, and they have to buy a bigger and bigger bundle of services if they want to get anything. If you want to buy the Discovery Channel for your children, you have to buy a package that includes a whole bunch of channels that you don’t want.”
This is yet more discussion on an issue that has been in the public forum for some time. I can only speak to my own experiences and opinions on the cable company I am stuck with (Comcast) but I think what I see is indicative of the issue as a whole. My household is currently paying over $140 a month for our cable and Internet service through Comcast and that is without any premium movie channels like HBO or Cinemax. This is more than my average water, gas and electric bill combined. Complaints about the cost are always met with the standard line that Comcast must raise prices to provider better features like Video On Demand and HD. Of the few times we’ve used VOD over the last 2 years it has been plagued with excruciatingly long wait times for the service to respond more often than not. Of the 6 movies we’ve rented 4 of them were with free rental coupons Comcast gave us after an attempt to watch Dan In Real Life ended 15 minutes in with an error message. HD is a nice option to have but the macro-blocking I’ve seen in the Olympic coverage pales in comparison to a Blu-ray disc while a large number of the HD cable networks show a majority of SD uprezzed to HD material. This is what they’ve raised my rates for? Plus you’ve got the added insult of Comcast’s constant barrage of promotions that promise fantastically low rates for a limited amount of time … but only to new customers. They never offer any kind of price break or even the modest “free” gift to existing, long-time customers. I can only speak about Comcast as it’s the only service I’ve had for the last 10 years since there is no other cable competition but I’m sure that the experience is similar with other provider.
It has been suggested that competition is the only real way to bring down cable prices. While common sense should tell those that make these kinds of decisions that competition is great for consumer prices the cable industry lobby says otherwise. And when the lobbyist speaks, lawmakers listen. I’ve looked into digital satellite but besides the fact that I don’t want some yahoo-installer-off-the-street trying to run satellite cable all through my house, once you look at the costs closely they really aren’t much cheaper than cable. Though that new Dish Network TurboHD service does seem as tempting as any
Discussion always goes back to the a la carte pricing model. But there is is also an argument that says a la carte pricing would often cost the consumer more and be the end of smaller, more obscure cable networks if they could not get bundled. So there is no real answer anywhere in sight. We’ll continue to pay high cable prices with little competition for the stalwart cable companies and the FCC chief will band the a la cart drum from time to time. U-verse and FIOS can’t come along soon enough.
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The FCC is beating the ala carte drum because its one more way to extend more control over the industry, not because it will really offer the consumer better choices. If the FCC truly believes what they say then they are extremely naive, ignorant or just plain stupid.
In any business I’m familiar with (and for a good example, just look at the restaurant biz), ala carte anything means higher per item pricing. In the cable/satellite biz that would equate to higher per channel prices.
For an easy example, if your cable bill is $140 and you receive 140 channels, most people are going to assume (wrongly) that will come to $1 per channel, and if they only want to receive 24 channels, they are going to further assume (again wrongly) that their bill should become $24 per month.
Isn’t going to happen. For one thing, different channels will have different rates. We already see this with premium channels. Rates will based on audience demand, with higher rated channels costing more.
I’ve estimated that, if ala carte pricing were to be mandated, the average cost per channel would range between $10 to $15. If they do not actually increase, most people’s bills will probably not be reduced a significant amount.
Now… if the FCC wants the cable/satellite industries to offer consumers ala carte pricing, in addition to existing rates, that’s fine. That would be true consumer choice. Don’t mandate one or the other. I like bundled programing. I’ve seen a lot of interesting shows I wouldn’t have seen otherwise.
P.S. I wish my electric bill alone were only $140 a month.
Scott, I believe that the best example of a-la-carte in action is the PCCW system in Hong Kong. There were lots of critics when they launched, but not anymore (since they’re widely regarded as the fastest growing IPTV deployment globally).
Regarding John’s comment. The FCC is considering the a-la-carte approach because it’s proven to lower costs for consumers, while increasing choice.
John is correct. Channels have different per-subscriber charges to the Cable systems that carry them. As an example, it’s estimated that if channels were unbundled then ESPN would cost more that $20 per month.
Ironically, that’s exactly why channels SHOULD be unbundled. Meaning, if you don’t watch ESPN then you are essentially subsidizing the service for all the people who do.
When consumers have a choice of an unbundled offering they pay only for what they want — no more, no less. Moreover, advertisers can sponsor a channel based upon the real viewership — not the inflated subscriber counts.
In summary, when a local government grants a monopoly to a cable company, but doesn’t regulate fees in a meaningful way, and doesn’t demand that channels are unbundled — you end up with your $140 scenario.
Keep in mind, this is not an academic argument since U.S. consumers current pay more for programing and service bundles than most other developed countries.
As an example, in France where service bundles are very competitive, consumers can get cable TV, phone service and internet access (with more bandwidth than the U.S.) for less than $50 per month.
The FCC is attempting to create an environment where U.S. consumers are not treated as second-class citizens. They are strongly criticized for deregulating the cable TV industry, because prices have skyrocketed since that time.
The FCC is being asked to either bring down the price of service bundles (in line with other countries), or force a shift to a-la-carte — doing nothing is apparently not an option.
Remember the FCC charter is to protect the public interest, and that doesn’t include perpetuating a model that is clearly broken.
Great comment David. While I would love some real choice on cable I can see this argument that with a-la-carte pricing then a lot of channels wouldn’t get off the ground. Since I don’t watch sports (except for sports car racing!) I would want to pay for channels like Current or the Documentary Channel but I wonder of niche channels like that would be able to launch in an a-la-carte model. It seems kind of like a catch-22 for networks like that.
Scott, Current TV and the Documentary Channel could be delivered over-the-top via your “real” high-speed broadband connection and piped straight into your the Ethernet jack on the back of a new flat panel “Internet Ready” television.
Watch the product announcements at the upcoming CES in January and you’ll realize that the 21st Century television experience will be very different from the past.
In this new visual entertainment model, niche content will be streamed or downloaded — only the most popular video will be “broadcast” over the air (terrestrial or satellite).
Furthermore, as media fragmentation continues unabated and the content options explode, you will only need one channel — the one that’s personalized for your own eclectic lifestyle and interests. More details of this vision are here
http://dhdeans.googlepages.com/digitallifescapes
BTW, this is no longer a blue-sky vision, because one year after I imagined it a new venture of Philips in the Netherlands has a platform capable of delivering this experience. Two years in development, it’s truly TV reborn.
$10-15 per channel?
Unlikely.
There are a few cable companies that offer A La Carte, due to local mandate by their town or county. Most charge a flat rate of $5 for hookup plus $2 per channel plus sales tax.
I’d be happy with that. Instead of paying ~$64 each month, I could choose the SciFi Channel, USA, TNT, and History Channels for just $14 each month.
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