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Why you can’t pick and choose cable channels

Posted by Chance on April 22, 2007

I’ve always wondered why cable companies don’t offer individual channels to customers. I’ve never endorsed knee-jerk legislation attempts to make cable companies do so, but I always thought it was a market that could easily be exploited.

The Cato blog explains

The problem with this line of reasoning [that buying individual channels would be cheaper] is that almost none of the cost of providing cable service to you is dependent on the number of channels you take. In economics jargon, cable channels have close to zero marginal cost. Once the content has been produced and the coax has been laid, it costs little or nothing to give every customer access to every channel in the bundle rather than only certain channels. So if they stop sending you Nickelodeon, it doesn’t reduce the total cost of providing you with your service. So why would you expect a price break?

Indeed, there are lots and lots of examples of bundled products and services that no one in his or her right mind would demand be unbundled. For example, why am I forced to buy the sports section with the business section in my morning paper? Why am I forced to buy evening and weekend minutes with my cellular phone plan?

I didn’t know much about how the cable infrastructure worked, but you would think that FCC chairman Kevin Martin would at least try to have a deeper understanding of this before he supports “a la carte” legislation.

A couple of things.

This shows that even if you trust a bureaucrat’s intentions, you can’t trust his/her competency.

But, maybe more importantly, even if it was cheaper to offer individual channels, the cable companies should be able to sell whatever products they want. As a free-marketer, I don’t think I should forcefully set the terms of the agreement. If a Mexican food place opens, what sense does it make for me to demand what they have on their menu? Also, as I said before, if it was actually cheaper to offer individual channels, this would be much less of an issue, as this is a market people would exploit. Finally, I don’t have the right to cable. It’s as simple as that. If this was about utilities such as electricity or water, I would be more sympathetic to the customers’ plight. But cable is not a necessity, so if people don’t like how it is being sold, don’t buy it.

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5 Responses to “Why you can’t pick and choose cable channels”

  1. dolphin said

    The premise of the CATO analysis is that whether they are sending you 1 channel or 1000 channels, the cost to the cable company is the same so therefore one shouldn’t expect to get fewer channels for cheaper. The biggest problem I see with that is that (I don’t know about everywhere, but with my cable company), I DO get fewer channels for cheaper or more channels for more money, I just don’t have the option of picking and choosing them.

    We have basic cable, digital bronze, digital silver, digital gold and digital platinum plans. The go from about 50 channels (with the basic) to around 600 or so with the platinum. And you better believe that platinum costs SIGNIFICANTLY more than basic.

    CATO is using their premise to argue against the customer but they’re ignoring the fact that the exact same premise could be used to argue in favor of the customer. If it costs the cable company no more to provide a customer with platinum service as it does with basic service, why should they expect to be able to charge more?

    I’m not arguing for legislation to make cable companies give platinum service for basic rates, just pointing out that CATO’s argument isn’t necessarily that well thought out.

  2. Chance said

    Dolphin,
    Good points. I forgot that cable offers different packages. Now that I’m thinking about it, they do have the premium channels, such as HBO, for which people pay more.

    The article does address the physical infrastructure, but how does it work as far as the cable company getting the rights to certain channels? Do they pay, for instance, ESPN, to show their channel(s)? I’m not sure how all that works.

  3. Josh said

    Yeah, I learned this the hard way when the wife & I were trying to cut back on spending and she signed us up for the basic package which eliminated SPIKE and all of my Sports channels. I wish she would’ve asked me first.

  4. dolphin said

    I’m not sure how it all works either. All in all I’ve been pretty happy with my cable service. We have the “Digital Bronze” package (which is the minimum package you need to use a DVR which as far as I’m concerned is the only thing that makes cable worth having at all. I’ve never been the kind of person to “never miss an episode” of anything). Looking at the higher packages they are predominantly sports channels and movie channels. Seeing how neither of us are sports fans and we are members of Blockbuster Total Access so we can rent as many movies as we want for $9.99/month (cheaper than going up a package or two in cable), we luck out. We do get a bunch of crap channels I could live without (The Game Show Channel and The Soap Opera Channel spring to mind), but we get all the various science, scifi, home, and basic channels that we would watch anyways, even LOGO (the gay and lesbian channel) though I’ve been disappointed with it and rarely if ever watch it.

    I feel sorry for the person who wants cable JUST to watch sports. I think they’d have to buy the 3rd highest package up to get more than just plain ESPN.

    I think some of the satellite providers offer more customizable programming packages (like Channels A-G plus 10 additional channels of your choice, or something like that).

  5. Chance said

    I haven’t had cable in some time, but I would be happy with a few channels, such as the ESPN’s, USA, and Comedy Central. and for my wife, Animal Planet, Discovery, and TLC.

    I’ve noticed though, everytime I go to a house with cable, I spend more time flipping through channels than actually watching TV, so sometimes I’m happy just flipping through 5 or so. Well, 8 if you count the Spanish Channels.

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