Let's pay only for the TV we watch; time for the cable industry to switch to a la carte pricing

I've been hoping for this change for years. ---BBB

http://www.latimes.com/business/la-fi-lazarus12-2008nov12,0,417316.column

From the Los Angeles Times
DAVID LAZARUS
Let's pay only for the TV we watch
It's time for the $79-billion cable industry to switch to a la carte pricing.
David Lazarus

November 12, 2008

Cable TV rates keep rising, and federal regulators said last week they're investigating -- again -- whether cable companies are gouging consumers.

Why bother? We're squandering limited regulatory resources policing an industry that's stubbornly clinging to an outdated business model (which, as a newspaperman, I know a little something about).

It's time for the $79-billion cable industry to switch to a la carte pricing that would allow customers to pay only for the channels they want to watch. Beyond being a matter of fairness, it would bring cable in line with the wholesale shift in how consumers now approach entertainment.

Call it the iPod factor. More on that in a moment.

First, an update from Washington, where Kevin J. Martin, chairman of the Federal Communications Commission, said recently he was concerned about cable companies' using the fast-approaching switch to digital TV broadcasts as an excuse to reach deeper into customers' pockets.

On Feb. 17, all TV stations will switch from analog broadcasts to digital signals. People who use rabbit-ear antennas to receive programming will need a https:// www.dtv2009.gov/ "> www.dtv2009.gov/ . Most cable and satellite subscribers will be unaffected, although some with older TVs may need to switch their set-top boxes.

Consumers Union warned that some cable companies were shifting analog stations to digital only, making them unavailable to customers who receive basic or standard cable service. The group said cable companies were prodding people to sign up for costlier digital packages.

"Ever-increasing cable prices is one of the most significant issues consumers face today," Martin told reporters. "They are getting less and being charged the same or more."

The average U.S. home now receives a record 118.6 TV channels, according to a recent report from Nielsen Co. But the dirty little secret of the cable industry is that the average subscriber watches only about 17 channels regularly.

That's more than 100 channels that most cable subscribers are paying for but seldom if ever watching.

Because of the number of cable systems nationwide, it's hard to get a fix on the average monthly bill. But many estimates place this figure at $60 to $70.

This means, if all channels cost the same, the typical cable subscriber is spending about $9 a month for the 17 channels he wants to watch and about $55 for the 101 channels he never sees.

But all channels don't cost the same amount. By most accounts, the sports channel ESPN is one of the most expensive carried by cable systems, costing by some estimates more than $3 a month per subscriber. Many other channels are said to cost as little as 25 cents monthly.

I never watch ESPN. When I watch TV, it's usually CNN, CNBC or a movie channel. On an a la carte basis, I could probably get the handful of channels I like for pocket change.

That, of course, is not what the cable industry wants.

Brian Dietz, a spokesman for the National Cable and Telecommunications Assn., offered an Alice-in-Wonderland rationale for why cable subscribers benefit from fat programming packages.

"The channels that you don't watch help pay for the channels that you do watch," he said.

Dietz went on to say that if a la carte pricing was really in customers' best interest, some cable company would have offered it.

"The fact that none of them offer a la carte is an indication that the marketplace is working," he said. "If there was truly a demand for that, the marketplace would lead to it."

In fact, a survey by Zogby Interactive last year found that 71% of respondents don't like having to pay for channels they don't watch.

The problem here isn't one of demand. It's one of supply. Simply put, the cable industry isn't giving customers what they want, because there's less money in it.

Cable providers have gotten away with dictating terms for decades. But people consume entertainment differently these days. Thanks to online music and video downloading services such as iTunes, and video sites like Hulu, people can watch or listen to what they want without buying or sitting through what they don't.

Dietz said there's no reason for cable companies to offer a la carte because the Internet's already doing it. "If consumers truly want that individual experience, they have the option of doing that online," he said.

No thanks. I may be comfortable reading a newspaper story on the Web or listening to tunes on an iPod. But I couldn't imagine spending an hour or two watching TV on my computer.

Here's a simple equation: TV + couch = relaxation.

According to the FCC, average cable rates nationwide more than doubled over the last 10 years. That's about three times the increase in the cost of living over the same period.

In Southern California, Time Warner Cable Inc. raised rates by about 7% in March. In Northern California, Comcast Corp. raised rates by 3.7% this month.

If the FCC really wants to do something about soaring cable bills, it can require a la carte pricing. If, as the industry claims, average bills then go up, we can return to the current system.

If, on the other hand, average bills go down, well, the cable industry will just have to adjust to a new business model.

It's simple. In the age of the iPod, people should be able to say, "I want my MTV -- and not much else."