Unbundling cable programming would be a boon for consumers

Joe Flint, in the Wall Street Journal, writes that if cable systems sold networks a la carte, prices wouldn’t go down and a lot of niche networks would be killed off. I think he’s wrong on both counts.

Supporters of a la carte billing like Sen. McCain and FCC’s Mr. Martin are well-intentioned — they want to lower consumers’ cable bills and stop forcing subscribers to pay for services they don’t use. While that might sound like a good idea, the reality is such a move likely would have the opposite effect: Cable bills would increase, while programming choices would shrink, hurting both consumers and the industry. That’s because pooling a big group of specialty channels into one cable package effectively lowers the cost of offering all the channels.

Bundled pricing allows everyone to make consumers pay for things they don’t want. Cable monopolies cross-subsidize their own networks. Owners of popular networks force their dogs onto the systems. Owners of desireable content (e.g. sports) demand prices out of line with their value to consumers because they increase the value of the bundle.

Ideally, unbundling networks would be accompanied by regulations forbidding cable operators from investing networks. This would give them the economic incentive to meet customers’ needs directly. But even if that weren’t done, unbundled pricing would improve cable content and prices.

It’s impossible to know what would happen if cable networks were unbundled. That’s one reason free markets work and why they scare monopolies. But here’s what I think would happen.

A lot of really lousy channels that are on the system because they’re owned by the operator, or are a forced buy with a valuable network, would get dumped because no one wants them.

Sports content owners would be forced charge prices more in line with their real value to consumers, lowering costs for cable operators.

Cable operators would begin looking for programming to fill the empty channels on their system, or to produce more revenue than existing networks. The availability of revenue from real consumers will stimulate the creation of new networks to serve their needs. The need to compete with existing providers in the primary categories will stimulate new providers to either differentiate themselves or cut their costs.

But one thing is certain. It’s impossible for cable programming to be more expensive or any worse.

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