I think I might like a few TV channels, but I would much prefer a system where I either pay for a few channels or just pay for what I want. Mr Swann articulates the standard industry position against such a proposal. My comments are in bold:
Congress, Leave Cable TV Alone!
Lawmakers want to cut prices, but their proposals could eliminate
many small cable networks and hurt new technology services.
By Phillip Swann
Washington, DC (March 26) -- Sen. John McCain, chairman of the
Senate Commerce Committee, is urging cable operators to offer a la
carte pricing for basic cable networks such as MTV and the USA
Network. However, the proposal, which is designed to lower consumer
prices, would actually hurt consumers as well as the cable operators.
And here's why.
McCain, and other lawmakers who favor the a la carte approach, don't
seem to understand that cable TV's entire revenue model is based on
packaging channels rather than selling them individually. Viewers
who now pay $20-$30 a month for a package of 25 or 30 channels
might spend half that under the a la carte plan, ordering just a few
favorites at $2-3 each.
"When I go to the grocery store to buy a quart of milk, I don't have to
buy a package of celery and a bunch of broccoli," McCain said in an
interview with The Washington Post. "I don't like broccoli."
Now, that may sound logical if you're a victim of rising cable prices.
However, the a la carte plan would dramatically shrink cable revenues,
making it more difficult for operators to provide new technology
services such as High-Definition TV, Digital Video Recorders and
Video on Demand. It's expensive to build -- and maintain -- the
infrastructure that's necessary to offer these features.
Here is where I think you make your first mistake. First you assume that cable TV operators need to provide these technologies. Only one of these is mandated by law (HDTV). The other two are technologies that are said to be the wave of the future. If these are publicly necessary technologies why doesn't the cable industry either:
1) Add a service charge to the bill for these technologies or
2) Petition the FCC to add a usage fee for these services
The reason this is not done is the cable industry realizes that such technologies are not necessary or have little public support. There would be little chance that the public would support such an item on their billing. However, packaging channels together, mixing free channels (EWTN), channel paid (HSN) and subscriber-paid (ESPN, HBO and everything else) costs are distorted. People see that you get 50 channels for x number of $ when maybe HSN is giving money to the cable company to carry the channel and ESPN maybe requiring the cable provider to give $2 to carry ESPN. A better system is where the customer can make the informed decision, adding HSN to his bill if he wants to reduce the bill for instance.
It's ironic that as Congress pressures cable operators to offer more
HDTV programming, it's discussing a proposal that would eliminate
the revenue necessary to provide it.
I agree. Congress is hiding HDTV requirements under must carry regulation. A better idea would be if it costs more money, Congress should be honest a say that a fee needs to assessed. However, nobody really wants to pay for HDTV so it would be impossible. A fee is much more honest than hiding the cost elsewhere in the bill.
In addition, the a la carte plan would put cable at a disadvantage in its
battle against satellite TV operators, who are not required to offer
individual channel choices. Consequently, the dish operators would
be under less pressure to keep their prices down and service up. The
competition between cable and satellite has been the best thing that's
ever happened to the American TV viewer. But a la carte would
destroy that overnight.
Satellite providers should be required to provide a la carte requirements, too. I don't see why Mr. Swann just doesn't ask that this part of the legislation be required of the satellite providers, too.
And, finally, if a la carte was offered, most viewers would order just a
handful of basic cable networks, leaving other channels to go dry and
eventually go out of business. Niche networks such as BBC America,
Tech TV and The Independent Film Channel probably would not
survive under a la carte plan. That would be a serious blow to
Maybe that diversity is the wrong type of diversity. I think that most diversity is just filler to say that you can provide X number of channels for Y number of $. Maybe instead of BBC America, subscribers would pay money for a version of Animal Planet without commercials. Personally I'm glad that BBC America was brought up since apart from old Avengers reruns, I find this channel a waste of my cable dollars. IFC is filled with movies that only the elite want to see. If diversity is required, let the industry float a proposal to have a universal subscriber fee to reduce the cost of the diversity so that people who want this diversity could get it at an affordable price. Again this is a non-starter. Diversity of programming is not something the American public would be willing to pay $$ or.
Congress should butt out of the cable TV business. If cable
operators continue to raise prices, they will lose subscribers to the
satellite TV business. That's the free market at work -- and it's the
best solution to keeping prices down.
Hah, the vast majority of cable franchises are monopolies and the satellite industry is little better with Dish and DirectTV being granted FCC licenses to operate with those frequencies. A free-market requires the ability for bodies to enter easily compete which isn't the case there. This is not a free market and the government has a perfect right to institute the regulation it thinks is necessary.
Phillip Swann is President & Publisher of TVPredictions.com. If you
would like to contact Mr. Swann, he can be reached at 703-505-3064
or at Swann@TVPredictions.com. And come back every weekday
for a new prediction for 2005!