The high cost of cable bundling
As with most issues in Washington, the truth is often clouded by special interest groups.
This is certainly true when it comes to consumer cable choice.
Many in Washington would agree that giving consumers the ability to pay for only the cable networks they want is a very real solution for American cable consumers who face rising costs every year without fail. Breitbart’s John Nolte has called bundled cable “one of the greatest hustles ever perpetuated against the American people.” He’s right.
In fact, the Federal Communications Commission just released new data showing that the average monthly price increase for expanded basic cable service continues to far outpace inflation, just as it has done for more than a decade. The reason is that cable subscribers are forced to pay for more and more channels they don’t want in order to get the handful of channels that they do want.
I’ve recently seen opinions that argue for keeping the status quo – a cable industry that is so entrenched in keeping the same cable model that benefits themselves at the expense of consumers.
These are the same critics of the Television Consumer Freedom Act of 2013, co-sponsored by Sen. John McCain (R-Ariz.) and Sen. Richard Blumenthal (D-Conn.), a bill that would pave the way for consumers to have real choice in what cable networks they want to pay for on their cable bills.
What those critics won’t admit is that the cable television industry “already has their thumb on the scale,” as Senator McCain noted. The current cable model is a failure of outdated and arcane federal regulation such as the 1992 Cable Act, not a reflection of the marketplace, as some people claim.
The Cable Act requires cable companies to offer a “basic tier” that consumers are forced to buy before they can purchase other services. Other programming is only provided in bundles of additional networks — a forced-extortion scheme that causes us to pay for more than we need or want.
For instance, every cable subscriber pays as much as $100 per year for the various ESPN networks, regardless of whether they are sports fans. Media outlets have reported that the ESPN networks, owned by ABC/Disney and forced onto every subscriber of basic cable, account for nearly 20 percent of the wholesale cost of cable programming; yet it reflects only 2 pecent of viewership.
Such a model clearly lacks a demand curve. And the pricing structure is substantially the same, whether a consumer subscribes to cable, satellite or Telco-delivered video service.
In a true free market, products cost what the marketplace dictates. If consumers knew what they were paying for each cable network in their bundle, they could make a market-based decision about which networks they actually wanted to purchase. And the cable networks would be forced to compete for the consumers’ business, instead of perpetuating the near-monopoly powers they currently hold.
Critics wrongly claim that your cable bill would rise even further with consumer cable choice. How could things get more expensive when the growth of cable prices already outstrips inflation by three to one? A 2006 study by the FCC found that consumers could save as much as 13% on their cable bills with a cable choice solution. Competition and free markets drive prices down for everyone.
Let’s keep in mind that cable choice is a very real possibility, and even more so with technological advances. Even Sen. Blumenthal pointed to this fact. “During the late 1990s, technological advancement and consumer demand forced the music industry to dramatically change the way it distributed music to consumers. Now is the time for the cable industry to do the same,” he said in statement.
So here’s the truth: Either the cable industry must voluntarily join the free marketplace for its products and services, or they must be forced to do so through the same regulatory means that allowed it to operate like a cartel in the first place. Unless and until that happens, consumers will continue to be fleeced by exorbitant cable price increases.
Cable companies should give consumers the choices they want and deserve.
Tim Winter is the president of the Parents Television Council, a nonpartisan education organization advocating responsible entertainment.