Cable Television Is Just a Cartel
Cable companies and government regulations stifle choices for consumers
September 17, 2013
Today's cable television model forces consumers to pay for dozens of channels they don't want in order to get the handful of channels that they do want. It is ostensibly a cartel, with industry profits built entirely on the consumer's back. If you don't like the model, too bad. There is no alternative. What's worse, this arrangement is "blessed" by government regulations.
If given a choice, most parents would choose not to subsidize the sexually-charged content on MTV. Some people might not want ESPN. Others may only want news or movie channels. Cable choice, where consumers decide for themselves which channels they want to purchase, is a realistic solution for all of us who face sharply higher costs every year without fail.
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. Choosing video content has become a lot easier, except for cable. One reason for this anomaly is an outdated and arcane federal regulation such as the 1992 Cable Act.
The Cable Act requires cable companies to offer a "basic tier" that consumers must 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, more than $100 of our annual cable bill goes to the ESPN networks, regardless of whether we are sports fans. Media outlets have reported that the ESPN networks, owned by ABC/Disney and forced onto every cable subscriber, reflects nearly 20 percent of the wholesale cost of cable programming, yet it reflects only 2 percent of viewership.
Such a model clearly lacks a demand curve. And whether you get your video via cable, satellite or Telco-delivered video service, the package and price are about the same.
In a true free market, prices reflect what the marketplace dictates. If consumers knew what they were paying for each cable network in their bundle, they could make an informed decision about which networks they actually wanted to buy. And the cable networks would be forced to compete for the consumers' business, instead of perpetuating the near-monopoly powers they currently hold.
It's time for the cable industry either to voluntarily join the free marketplace for its products and services, or it must be forced to do so through the same regulatory means that allow it to operate like a cartel in the first place. In the meantime, consumers will continue to be fleeced by exorbitant cable price increases, mostly for networks they don't even want.
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