John McCain: Hero again

[MadImmortalMan]

http://www.latimes.com/news/opinion/commentary/la-oe-mccain-cable-tv-choice-20130523,0,1435979.story

John McCain: Cable TV, the right way
My legislation would ensure that consumers could buy only those channels they want to watch.

By John McCain

May 22, 2013, 4:46 p.m.

America's 100 million cable and satellite subscribers are forced to pay ever-higher bills for a growing number of channels they do not watch. The American people are being ripped off.

Meanwhile, services such as iTunes and Netflix have led a revolution in how consumers purchase and experience music and video entertainment. They have upended entire industries to allow consumers to buy digital content where they want, when they want. Amid all this change, two entrenched interests — the cable television and video programming industries — have teamed up to use federal regulations to stack the deck against consumers.

The numbers are striking. According to the Federal Communications Commission, the price for basic cable has grown by an average of 6.1% a year over the last 16 years — three times the rate of inflation and far outpacing the average American's paycheck. Cable bills are projected to continue rising to an average of $200 a month by 2020.

The 82% of American households that subscribe to cable or satellite television are stuck paying escalating prices for "bundled" packages of more than 100 channels, despite the fact that the average viewer tunes in to only about 18 of them.

Reinforcing this fundamental unfairness is a federal regulatory and legal framework that tilts in favor of cable companies and television programmers at the expense of consumers.

This framework, which includes arcane but important benefits such as "compulsory copyright licenses," "syndicated exclusivity," "network non-duplication" and "retransmission consent," was originally developed to help the fledgling industry grow. Today, these benefits, vigorously defended by armies of well-paid lobbyists, are helping sustain the status quo while failing to push the industry to meet modern consumers' evolving demands.

Case in point: I am a certifiable sports nut and ESPN fanatic. I enjoy just about every sport, and I stay awake many nights in Washington watching games in Arizona that don't end until well after midnight. Although I'd never go without ESPN, the fact is that millions of other viewers have no interest in sports programming. What many of these Americans are beginning to realize is that included in their cable bill is a charge of about $5 a month to carry ESPN.

That's an "ESPN tax" of $60 a year that they're forced to pay for having cable. And because it's part of their bundle, the only way to avoid it is to cancel their cable subscription entirely. This status quo is fundamentally unfair and wrong.

Now, many will say that the government should stay on the sidelines and out of the free market. I'd normally agree. But the truth is the government already has its thumb on the scale in favor of industry and against the interests of consumers. It's time for that to end.

I have introduced the Television Consumer Freedom Act, which aims to provide consumers with the option to buy only those channels they want to watch. The bill includes no mandates. Rather, it sends a powerful message to cable and satellite companies, such as Cox and DirecTV, and television programmers, such as Disney-ABC and NBC-Universal: If you want to continue to enjoy government-afforded regulatory benefits, offer TV-watching Americans an a la carte approach to programming rather than the take-it-or-leave-it ultimatum we have today.

Another provision in the bill seeks to end the practice of sports team owners punishing fans by blacking out home games that don't sell out. It provides that games taking place in publicly financed stadiums can't be blacked out.

The reaction to my proposal could be a case study of the trouble that common-sense ideas too often face in Washington. Consumer groups and everyday citizens roundly support it. If it were up to my Twitter followers, this bill would already be law. But entrenched interests, including the cable and television programming companies whose bottom lines may be affected by any effort to empower consumers, have made it clear they're girding for a fight. They're firing up their legions of lobbyists and preparing public relations campaigns to convince Congress of the remarkable "value" of the bundles they force on their subscribers.

This is an uphill battle, but I'm sure that the market will ultimately find a way to meet consumer demand. Many industries over the years — from the stagecoach builders and saddle makers to those who made the eight-track tape and the Sony Walkman — didn't much like the change forced on them by the tide of history. Sooner or later, companies standing in the way today will face a similar choice: Meet consumers' demands or become obsolete.

John McCain (R-Ariz.) is a member of the Senate Committee on Homeland Security and Governmental Affairs.

I'd trim down to about ten total channels.

[Valmy]

That would be great

Yes to Longhorn Network.  No to Lifetime.

[The Brain]

History Channel is all humanity needs. Or deserves.

[Eddie Teach]

I'd trim down to about ten total channels.

AMC
F/X
USA
Nat Geo Wild
Animal Planet
BBC America
GSN
ESPN for college football season

Plus the networks. Though I suppose I could cut Fox and CBS to get down to 10.

[derspiess]

No matter how the rules change, the cable companies will still find a way to screw us.

SHAREHOLDER VALUE!!!

[Caliga]

McCain needs to do this same thing for satellite radio too.  I would subscribe to Sirius XM but the *only* thing I want to listen to is Stern, and last time I checked you have to buy like 50 channels minimum, which irritates me because I would definitely never listen to anything else I'd be forced to buy.

[Eddie Teach]

You don't like music?

[The Minsky Moment]

There is no good reason to think that customers would benefit from a la carte pricing.  Cable TV is a classic case for bundled pricing because of low marginal costs of delivery and very high variance of demand for component elements.

It is quite possible that a la carte pricing for the components would be very high; 10 channels bought separately could easily cost as much as 150+ bundled.  Channels that have strong core audiences like AMC are going to be particularly able to command premium pricing.

[Admiral Yi]

What Joan said.  The people who think they'll end up with $5 cable bills will be sorely dissapointed. 

[Valmy]

What Joan said.  The people who think they'll end up with $5 cable bills will be sorely dissapointed. 

Actually with sports stations I figure I would be paying roughly the same since they are all so pricey.

[Caliga]

You don't like music?

I do like music.  But I have tens of thousands of MP3s, so I don't need to pay for it.

[alfred russel]

There is no good reason to think that customers would benefit from a la carte pricing.  Cable TV is a classic case for bundled pricing because of low marginal costs of delivery and very high variance of demand for component elements.

It is quite possible that a la carte pricing for the components would be very high; 10 channels bought separately could easily cost as much as 150+ bundled.  Channels that have strong core audiences like AMC are going to be particularly able to command premium pricing.

I wonder if some niche stations would be badly hurt. For example, some sport stations with particularly strong followings in certain regions charge high per subscriber fees despite offering little highly viewed content. The business model is almost a perversion of pay per view: but rather than charging each viewer $50, they charge $1 per subscriber. The cable companies feel obligated to offer the channels because a small portion of their audiance will go ballistic if they don't.

[grumbler]

There is no good reason to think that customers would benefit from a la carte pricing.  Cable TV is a classic case for bundled pricing because of low marginal costs of delivery and very high variance of demand for component elements.

It is quite possible that a la carte pricing for the components would be very high; 10 channels bought separately could easily cost as much as 150+ bundled.  Channels that have strong core audiences like AMC are going to be particularly able to command premium pricing.

That's called "the market."  If you think the price for a channel is too high, then you stop subscribing.  If enough people agree with you, the provider will lower the price.

I mean, it is possible that the price of foodstuffs I'd like to have in my grocery cart, if priced separately, will be more than I want to pay.  So I won't buy some things.

The real problem is how many, and which, options will be available to the consumer.  There's a fixed bandwidth.  With unbundled offerings, some channels with low demand just won't be available at any price to a given consumer.  But that's already the case, so i think it is a problem consumers can live with.

[The Brain]

I mean, it is possible that the price of foodstuffs I'd like to have in my grocery cart, if priced separately, will be more than I want to pay.  So I won't buy some things.

You think shoplifting is OK just because the price is too high? Is this about sticking it to the shareholder value, CdM style?

[The Minsky Moment]

That's called "the market." 

It's not.
If the market controlled, distributors would presumably continue to bundle because that is profit maximizing and they would deny the a la carte option.
This is coercive legislation that is forcing market participants to act other than they would in the market.

I am no libertarian and I don't have any objection to the principle of legislating against market outcomes.  I just don't think the result here is necessarily going to be what some of the supporters of the legislation think it will be.  People should make informed votes.