TV À La Carte is a simple idea that entertainment should be what we want, when we want it, at a reasonable price.
Do you remember when TV used to be free? As we switched from rabbit ears to underground cable, Big Cable gained control of the last mile of connectivity. Unlike, water or electricity, these pipes are privately owned. Why is this bad for you? Hmm... well, do you feel like you are provided with cost effective options for your TV programming and high-speed cable? Are you receiving receiving strong customer service? Unlikely.1
You aren't the only one frustrated with your cable provider. The American Customer Satisfaction Index found that “three of the then nation’s largest cable companies – AT&T Broadband, Comcast and Charter – now rank among the worst rated businesses in the history of the their survey. Comcast and Charter Communications both score 55, which is lower than the Internal Revenue Service... That doesn’t mean that people enjoy paying taxes more than they do watching cable TV, but in the context of what these organizations do, the [IRS] offers more satisfactory assistance than the [cable companies].&rdquo2
Death and taxes... and terrible cable service?
A Good Hike: The Dipsea Trail. A Bad Hike: Your Cable Bill
In the ten years following the Telecom Act of 1996, cable rates have climbed 59%, three times the rate of inflation.3
And the cost continues to skyrocket... Comcast is squeezing $6 more per household now than it was a year ago, and their profits were up over 20 percent.4
University studies suggest we pay billions more each year due to the lack of viable competition. “We estimate that consumers pay an extra $8.4 billion annually in the form of higher rates and fees as a result of video franchise regulations. In addition, these price increases generate $2 billion in deadweight loss, or value that consumers forego annually because higher prices induce some consumers to go without cable television.”5
If It Looks Like a Duck and Quacks Like A Duck...
Poor customer service and constant rate hikes are two strong symptoms of a monopoly. Although the cable industry pushes back suggesting that competition exists, noting the dozens and dozens of cable operators across the country. Really? There could be hundreds, even thousands of cable opearators across the country, but does it matter to a San Francisco resident if there is only one option
for their street address? The cable operators have effectively created local fiefdoms. I would include a snapshot of a map detailing cable operators by zip codes, but purchasing the maps is now cost prohibitive since the cable operators have driven up the price seeking out their next conquest.6
Power Corrupts, Absolute Power Corrupts Absolutely
A monopoly is termed “coercive” when the monopoly firm actively prohibits competitors from entering the field. Case studies reveal that prices drop when competition enters a region. In a 2006 report on the Texas cable television market, “subscribers switching services saved an average $22.30/month and even those who stayed with their original provider saved an average $26.83/month due to downward pressure on rates as a result of competition.7
The FCC’s annual report on cable prices found that cable prices were over 10 percent lower in communities served by a second cable operator than they were in noncompetitive communities.8
Not content to milk their monopoly as a cash cow, Comcast is on a quest to not just control the pipes but also the content. Just last month, Comcast announced that they and NBC Universal are creating a new joint venture 51% owned by Comcast and operated by Comcast. If approved, Comcast will control of 7 out of 20 of the top cable channels and would own one out of every five viewing hours on television. Perhaps, even more nefarious, Comcast would also take a controlling stake in Hulu, the upstart Web site offering free streaming content. Frustrated cable subscribers have hoped that Hulu will continue to increase their breadth of offerings, including movie features and full episodes of hot TV shows. The more compelling this stable of content, the more enticing the notion of cord-cutting
–terminating one's cable programming. But if you had 25 million subscribers on average paying $115.27 per month, do you think you would invest heavily into a technology that increased the likelihood of subscriber attrition?9
The average cost per subscriber might actually be higher, except that the direct broadcast satellite services (e.g., DirecTV, Dish Network) provide some competition even without a compelling high-speed Internet offering.
Why would Comcast acquire the cable networks? Well, think win-win situation. For example, Comcast acquired Versus with the acquisition price set roughly by the number of subscribers and the monthly carriage fees. When the carriage agreements were recently up for renegotiation, Versus (now owned by Comcast) reportedly increased the monthly fees from 18 cents to around 29 cents per subscriber per month. Comcast is largely indifferent in what they could pay for the carriage fees because it is simply a handoff from one hand to another. DirecTV though would directly bear the cost of this increase with limited ability to recoup the cost from their subscribers. Comcast wins both ways: either they acquire a cable network at a discounted market value (given the over 30 percent increase on carriage fees without any cost increase) or they gain an invaluable programming edge against DirecTV who no longer may broadcast the Tour De France or the Stanley Cup playoffs.10
Acquiring content, in particular, acquiring premier local sports networks, has been Comcast's modus operendi for decades. It has been said that “Philadelphia is where satellite TV salesmen go to die.” Why? Comcast owns the Philadelphia 76ers and the Flyers providing exclusive coverage through their cable programming.11
Similar problems are beginning to arise in Detroit, Chicago, Baltimore, Miami and Sacramento–all markets where Comcast controls over 35 percent market share. Oh, and the Bay Area regional sports network is 45% owned by Comcast posing significant vertical foreclosure issues to the satellite services.12
Unless you are part of the 1 percent minority, then you have at least one TV along with cable programming. It might be expensive, but you receive the content you want. But, is it possible to opt-out of content we don't want? Sorry! You want ESPN? You'll also take Disney, Lifetime, Nickelodeon, C-SPAN, The Golf Channel, TBS, VH1 and another 30ish channels. Not only do you have to pay for them, you will be reminded that you are force-fed these channels each time you page up and down through the channel listings. And for the cable networks, it is big business to get their channel included in the basic cable package. 2010 will mark the year of the programming wars
–the battle between programmers and cable, satellite and telco video providers to determine fair subscriber fees. Regardless who wins, ultimately, we still pay the monthly cable bill.
While every other company in America is working day and night to eliminate any waste, Big Cable is fattening us up for the kill. We blame the fast food companies for obesity, but it ain't just the french fries... we're couch potatoes.
Pause for a moment and consider our situation. We are branded with an account number. We are herded into a programming tier–a lot labeled “basic,” “preferred” or “premier.” Big Cable force-feeds us pellets of programming, 10 times more than we would voluntarily consume, in zealous pursuit of sweet, buttery profits from bloated affiliate fees and wanton advertising.
To them, we are foie gras.
Big Cable would have you believe that bundling benefits the consumers. Perhaps, 30 years ago there were advantages since there were only a few channels and no technology to create customized packages. But, today we now have hundreds of channels piped into our homes and we can't watch them all. In fact, the average household tuned into only 16 of the 118 channels available each month.13
Who benefits? Probably not you... unless you watch more TV than the average American, over five hours each day.14
Who says there's no bipartisanship in our country? There is support across the aisle when it comes to cable bills... Republicans are force-fed MSNBC and CNN while Democrats must pipe in Fox News. Regardless whether or not we watch these channels, we are paying. The carriage fees are roughly 16 cents (MSNBC), 50 cents (CNN) and 64 cents (Fox News), which might seem like small potatoes... except that each channels is piped into almost 100 milllion paying households.15
Who is bundling really subsidizing? The networks and Big Cable. We the consumers are left picking up the tab. Studies reveal that switching over to an à la carte distribution model would save consumers an “estimated 8.5%, or $4.4 billion per year.”16
You've read this far down, you deserve a reward. Take one small step to restoring competition into the cable industry by signing the pledge on the home page
. Who should NOT support this movement?
- * Big Cable providers (current business is way too profitable)
- * Niche channels blessed to be a part of the basic lot but without compelling programming (Oxygen? Lifetime? ESPN Classic?)
- * Couch potatoes watching 100+ channels (we are subsidizing you!)
Actually, there are a few progressive cable providers who elevate our collective well-being over their self-interest. Charles Dolan, chairman of Cablevision, is one of the few cable operators to openly favor an à la carte system. “Fundamentally, (à la carte) would be better for the consumer. And if you do something that is better for the consumer, financially and economically it's going to be better for the industry.”17
For the couch potatoes, if you're not going to do anything and just accept the status quo writing those $120 checks each and every month, do yourself a favor and watch Mad Men
on AMC. Everyone else, let's join together and pick the programming we actually want to watch.
We just got a mention in Mister Archer: Undiscovered San Francisco Revealed
“And it is about to get worse as Comcast acquired a majority stake in NBC Universal. If approved, Comcast would take control of one out of every 5 hours of programming and 7 out of the 20 top cable channels. The Comcast acquisition of Versus channel earlier this year reveals a strategy whereby they force their competitor (e.g. DirecTV) into a no-win situation: either pay the surprise rate hike to Comcast or deprive their viewers of content (e.g., Versus no longer available on satellite). If you thought Comcast had a monopoly on your block, just wait for next year. Bundling programming robs the cable industry of price transparency and old fashion competition.
There must be a better option. So let me raise my snifter and propose an alternative: TV À La Carte
Read the full write-up here: An Alternative to Big Cable?