Wyoming Liberty Group
Cable Unbundling Bill a Bad Bet
[The following blog post is reprinted by permission of The Mackinac Center for Public Policy, which first published the piece on May 23, 2013.
Imagine a world where you could have anything you desired and could jettison those things you don’t. For example, I recently purchased a CD box set of the band 10cc, and I could do without the majority of songs recorded after Lol Creme and Kevin Godley departed the group. Likewise, I’d love it if 1964’s Beatles for Sale didn’t include the song “Mr. Moonlight,” which I humbly consider the nadir of the Fab Four’s entire body of work.
Now that I have those personal preferences off my chest, I should add that I can learn to live with owning yet another copy of 10cc’s “Dreadlock Holiday” that I’ll never listen to, and as well have found digital detours around the dreaded “Mr. Moonlight.” Crisis averted.
Not so for Sen. John McCain, however, who seems to feel it’s the duty of the federal government to ensure your local cable and satellite providers don’t bundle channels you watch with channels you avoid. On May 9, Sen. McCain introduced the “Television Consumer Freedom Act of 2013” (S.912), which would require multichannel video programming distributors to offer individual television channels on an “a la carte” basis.
Is the current system somewhat annoying? Sure, but, as Al Capone reputedly said, “Don’t make a federal case out of it.”
Sen. McCain apparently loses sleep at night because MVPDs sometimes require customers to pay for channels they don’t want in order to receive the ones they do want. Fair enough, but there are perfectly legitimate reasons for MVPDs to bundle channels. On this, more later.
But, even if there weren’t, current technologies already provide television viewers with enough a la carte options to choke a horse. In a May 17 blog post, Randolph May, president of the Maryland-based Free State Foundation and a telecommunications policy expert, declared: “In the history of humankind, consumers never have had so many choices for watching so much diverse video programming offered by so many video providers.”
Today, Netflix, with 29 million subscribers, is the nation’s largest subscription video service, with more subscribers than Comcast (22 million). In addition to the dominant provider Netflix, other major online video programming purveyors include Hulu, Amazon, iTunes, HBOGo, and Apple TV. Not to mention YouTube, which recently announced initiation of a subscription video service. And, of course, in addition to the traditional “television” screen, you can watch all this various video programming on laptops, notebooks, and smartphones.
We truly do live in the age of “TV Anytime, Everywhere.”
But what to make of the argument that consumers take it on the chin for MVPD channel bundling? According to John Stephenson, director of the Communications and Technology Task Force at the American Legislative Exchange Council, this, too, is misleading:
In 2003, the U.S. Government Accountability Office found that going from bundling to an a la carte model could cost video providers advertising revenues that would result in an increase in subscriber fees. Brent Skorup at the Mercatus Center explains why bundling works: “Bundling is efficient because in a high fixed-cost industry, like cable, cable channel bundles provide cost savings that outweigh the costs of providing ‘wasted’ channels consumers don’t watch.”
Even economic thinkers on the left dispute the notion that an a la carte model is a solution. Matty Yglesias at Slate notes that a la carte “starts with a fundamental misunderstanding: the delusion that if your basic package contains plenty of channels you never watch, you’re paying for many channels you don’t watch. It’s understandable that people would think in those terms, but it’s wrong.”
May concurs: “[A] government-mandated a la carte regime would not necessarily lower prices for consumers and might well diminish, even substantially, the number of channels available, especially those appealing to minority or specialized tastes,” and adds:
With the unbundling of all channels, the costs for making available certain individual channels would rise as the audience size for particular channels is reduced. Some channels almost certainly never would get off the ground because, absent the opportunity to bundle them with already-popular channels, MVPDs would not risk incurring the costs of carrying a channel with little initial expected audience demand.
In other words, Sen. McCain’s bill doesn’t acknowledge recent technologies that compete with traditional MVPDs; won’t necessarily lower costs to consumers; and may limit consumer options as well as present a barrier of entry for cable and satellite startups. It’s the Television Consumer Freedom Act rather than channel bundling that poses the real threat to ardent television viewers and the television industry at large.