A Stitch in Haste

Wired is carrying an AP report that the FCC will recommend to Congress that cable companies not be required to offer per-channel pricing to consumers:

The analysis by FCC staff found the average cable household watches about 17 channels, including over-the-air broadcast stations. If a subscriber purchased that many channels under a pick-and-choose system, he probably would face a rate increase of at least 14 percent and as much as 30 percent, the analysis said.

According to the report, an "a la carte" pricing system would drive up cable companies' costs for equipment, customer service and marketing, and the charges almost certainly would be passed to subscribers.

Smaller niche channels, such as those with religious programming or channels aimed at minorities, could disappear with the loss of advertising revenue and extra costs that cable operators would have to pay, the report said.

Consumer groups denounced the findings. "The study was rigged against consumers in favor of large cable companies, giant broadcasters and other media behemoths," said Gene Kimmelman, senior director for public policy and advocacy at Consumers Union, which publishes Consumer Reports.
...
Consumer groups point to government statistics that show cable prices have increased by 56 percent since 1996, when Congress deregulated price controls for cable programming services.

So let me get this straight clear: The cheapest way to provide 17 channels is to force subscribers to buy 500 channels? I'd like to see Tyler Cowen, Arnold Kling or Steven Landsburg make that pig somehow fly.

Could you imagine if Kellogg's tried to claim that the cheapest way to provide cereal was those variety packs of various single-serve boxes when all you really want is the Raisin Bran and the Rice Krispies? Of course not. The cable industry has yet to demonstrate why the economics of their business are somehow different. Indeed, all the evidence suggests otherwise, other than their repeated empty chants of "because we say so."

Of course, if cable television were a completely free-market industry, then I would say let them price their product however they like. But recall that "cable deregulation" meant only "rate deregulation" -- the companies are still government-chartered monopolies that really only face direct competition from satellite, and even then only in some areas. An industry that reaps the rewards of near-monopoly power should also pay the costs that come with that power.

At the very least some pilot programs should be mandated to get some hard data.

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