In his NYT Talking Business column today, Joe Nocera counts "the bundle of networks [that] cable delivers into your home" as "one of the blessings" of the cable industry. Ha!
He writes that requiring cable giants like Comcast and Time Warner to let subscribers choose their channels "would be a consumer disaster." Double ha!
His proof consists of the hypothesis that "a la carte will almost surely cost more than your current ‘exorbitant’ cable bill" because it would eliminate the "subsidizing" effect of bundling. Obscure, niche, and — let’s face it — bad channels survive because the good ones in the bundle carry them. Triple ha!
Blawgletter realizes that saying "ha!" over and over again doesn’t make much of a persuasive argument. And yet we have a point, which will take us a few more paragraphs to lay out.
We ask first whether the cable colossi favor or oppose a la carte. Answer: They hate it with a passion. That should tell you something.
Second, how do the behemoths of bundling benefit from same? For starters, they use it to justify skyrocketing cable rates, which have risen far faster than inflation. The more channels in the bundle, the lower charge per-channel — Comcastic! If you get 200 channels of junk plus 20 that you may actually watch instead of only 100 junk channels, you pay less on average for each channel — wow! And some regulators actually buy the argument.
Third, who cares if the price of ESPN quintuples — as Mr. Nocera posits it will — in an a la carte regime? Will die-hard sports fans really suffer from having to choose between the droll repartee of ESPN’s celebrocasters and the possibility of falling in love with a cooking program while switching channels?
Fourth, why on earth does Mr. Nocera think that giving consumers more choice in the short term will in the longer term result in less? He asserts that killing the bundling subsidy will wreak havoc on less popular or new channels, sending them to cable oblivion. He asserts that but does nothing to substantiate it. And we don’t believe a bit of it.
For one thing, guess who does more and more programming these days? Correct — the cable companies themselves. And guess who decides whether to put the cable companies’ new programming into the bundle? Right again. The monopolists’ ability to discriminate in their own favor already constrains consumer choice. A la carte would at least make the discrimination and its effects more visible.
Nor would a la carte spell the end of all bundling. We see no reason why consumers couldn’t choose a bundle — or a combination of bundles — instead of selecting each and every channel they want.
Finally, we recall another monopoly that not so long ago bundled all its services under the sleepy eye of the Federal Communications Commission. Ma Bell provided all Americans with a clunky, monochromatic, rotary-dial telephone; local service; directory assistance; and long-distance service, which (not coincidentally) subsidized local service in the name of universal service. Now, of course, you can buy what you want from just about whichever company you like. We pay the freight for encouraging universal telephone ownership in a fully transparent way. Unbundling seems to work.
We suspect that Mr. Nocera’s aversion to a la carte results in part from the comforting notion that monopolists may act benevolently. We admit the possibility but point out that Comcast and Time Warner know what Ma Bell did back in the day — that the power to limit output, including in the form of consumer choices, maximizes the monopolists’ profits at the expense of consumers.
Who hates a la carte the most? The ones whose ox it would gore.
Barry Barnett
