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Saturday, Nov 01, 2014
Commentary

Time to end the cable cartel

Published:

Saving money on your cable bill isn't just a laughable statement, even though we all know that the cable industry raises prices every year without fail.

A bill called the Television Consumer Freedom Act of 2013, recently introduced in the U.S. Senate by Sen. John McCain (R-Ariz.) and now co-sponsored by Sen. Richard Blumenthal (D-Conn.), would finally give consumers a choice in what cable networks they want to buy and save them money at the same time.

The current model forces cable subscribers to purchase a bundle of networks, thereby costing consumers more on their cable bills.

If passed, the bill would allow consumers to choose and pay for only the cable networks they want. Forced to compete for the consumer's dollar, cable networks would be forced to deliver a better product at a lower price.

A 2006 study by the Federal Communications Commission found that consumers could save as much as 13 percent on their cable bills with a cable choice solution.

Choosing and paying for only the cable TV networks' consumers want is the ultimate free-market solution to a problem that was caused by government regulation in the first place.

The current cable model is a failure of regulation such as the Cable Act, not 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. This model does not serve the needs of consumers.

As Sen. McCain recently wrote in the Los Angeles Times, ".the truth is the government already has its thumb on the scale in favor of industry and against the interests of consumers. It's time for that to end."

The cable television industry certainly has a stranglehold on consumers, holding us hostage to an outdated way of gaining access to cable networks, while significantly raising prices every year without fail. The average cable customer in the U.S. is already paying a monthly cable bill of $84 and faces an average annual price hike of 5 percent.

The networks' bundling scheme forces us to pay for networks that we don't want or don't watch.

For instance, every cable subscriber pays approximately $100 per year for ESPN, 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, reflects nearly 20 percent of the wholesale cost of cable programming; yet it reflects only 2 percent of viewership.

Or take MTV. Millions of families would probably prefer not to have the teen-targeted network with such shows as "Girl Code" or "Jersey Shore" coming into their homes.

The status quo of selling cable networks in bundles to consumers is a forced-extortion scheme, causing us to pay for more than we need or want. That is why consumers are cutting the cord at a rapid pace, according to the Leichtman Research Group. Many of those cord-cutters are turning to alternatives such as Netflix, Hulu Plus or Amazon Prime Instant Videos.

Sen. Blumenthal pointed to the fact that technological advances are in place to make cable choice happen. "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.

Jeff Kagan, a well-respected technology industry analyst, has stated his reasons for a cable choice solution. "There are two different groups that are at odds here, the investor and the customer. The investor wants the cable television industry to earn as much as possible. The customer wants the cost they pay to be as low as possible. I don't see destroying the old model and replacing it with a new model being a bad thing. I think if we come at this with fairness to the customer in mind first, the marketplace will settle in to this new model and will continue to grow and the investor will also win. It always seems to work this way," he said.

It's time for the cable cartel to end.

Tim Winter is the president of the Parents Television Council, a nonpartisan education organization advocating responsible entertainment. (www.parentstv.org). Winter spent more than 20 years in broadcasting, cable and digital media, including 15 years at NBC, where he helped manage the network's financial interest in two dozen cable networks.

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