Logo

Editorial: Straight talk on cable TV prices

Apr 29, 2002  •  Post A Comment

“Sir, would you like that prix fixe or a la carte?”
The waiters at upscale French restaurants offer that choice, but in the complex world of cable and satellite television, prix fixe is the rule, and there are few channel substitutions allowed. Sen. John McCain, R-Ariz., has requested an inquiry into why the price of cable television is rising faster than inflation, with the average bill $36.99 a month.
The senator thinks the high per-subscriber fees that multichannel video providers pay cable networks may be the problem, especially since large media companies often leverage multiple networks to gain carriage and extract higher prices. He wonders why consumers can’t order the channels they want a la carte.
While many viewers are happy with cable-happy enough, at least, to keep paying for it-who knows how many would welcome the chance to lower their bill by picking and choosing? And multiple system operators have seemingly thrown up their hands, with the Time Warner-Disney showdown in New York and the current battle between Cablevision and the YES sports network being two notable exceptions.
As in the case of Cablevision and Time Warner, businesses negotiating with their suppliers for terms agreeable to both is what American business is all about. Having the government step in and set the rules could have a chilling effect. Cable’s dual revenue stream of subscriber fees and advertising may be seen by some as overflowing, but having Washington dam that river and control its flow may not be the answer that viewers and MSOs are looking for. Networks such as CNN and ESPN that count on near-universal carriage would have to revamp their business models to attract subscribers, and the lower costs per thousand that cable commands wouldn’t be as easily tolerated. On the other hand, we all know what happens when a cable network must appeal directly to viewers for its lifeblood: the wildly popular HBO. At the very least, giving both MSOs and viewers a compelling reason to choose your product can’t be all bad.
In one sense, Sen. McCain is headed in the right direction. Opening the hood on cable television and examining the usually secret negotiations between MSOs and networks would be enlightening for all.
However, where government can-and should-have the most impact is in preserving healthy competition where it exists and fostering it where it does not. If Sen. McCain wants to help, he should throw his energy behind stopping the EchoStar-DirecTV merger, fostering Northpoint Technology’s terrestrial over-the-air video and data service and encouraging overbuilders to enter the marketplace. More choice is the best catalyst for change.
In the meantime, all the MSOs have to do is step back and look at their businesses. It’s clearly time for hard negotiating and the willingness to do what’s in the best interest of their customers and themselves.