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TV transmission model is dysfunctional

Posted: September 21, 2013 10:52 a.m.
Updated: September 21, 2013 10:52 a.m.

The contract dispute between Time Warner Cable and CBS which resulted in a month-long blackout of CBS in Los Angeles and other major markets may be over, but there is much to be addressed concerning the dysfunctional way Americans get their television.

The current cable T.V. business model is outdated and skewed away from consumers and tilted toward benefiting cable companies and the networks that own the channels that are on them.

Customers who subscribe to pay-for TV services continue to decline. Subscribers universally complain about rising costs and bundling of program packages that include a multitude of channels they do not watch. Traditional cable companies such as Time Warner face further subscriber losses to other companies like Verizon and AT&T, which also enjoy monopoly and franchise positions in the marketplace.

Cable TV companies in general enjoy a lightly regulated monopoly position. They have enormous lobbying power in Washington D.C. and in state houses. Legislative attempts to “rebalance” the model more toward subscribers get little traction. Pricing structures among the purveyors are suspiciously similar. Franchise positions are granted by local governments who have very little say in the provisions of the agreements and protecting their citizens. The barriers for entry for new competitors are high due to the wealth and power of the incumbents.

Any wide scale implementation of a la carte structures where subscribers pay only for the channels or mini-packages they want would totally disrupt the current cable TV business model and are stiffly resisted by the cable TV companies. Advertisers pay the cable companies more for larger channel bundles. Advertisers would pay far less for individually selected channels and many of the little viewed or underperforming channels would disappear without package supported advertising. Good for the subscriber. Not good for the cable TV, satellite and network companies who would see advertising revenue drop.  

Cable companies counter with their view that a la carte pricing would actually be higher for subscribers. Perhaps, but subscribers would have the opportunity to choose what they wanted and determine its worth.

Huge tech companies like Google, Apple and Intel are entering this lucrative market and steadily taking away subscribers from cable TV and satellite companies. For the subscribers who want to pick and choose only the programming that they want, the tech companies sound like the answer to their prayers.
Complicating this, however, is that cable TV companies (and phone companies) are currently allowed to create barriers to this type of competition by limiting the bandwidth a subscriber can use. This is commonly called throttling.

Unfortunately, as a subscriber your effective options are somewhat limited. You can change providers, drop the service entirely, or jump on the streaming video bandwagon and hope that you don’t get choked off the system sometime in the future. We think that the answer to all this seems to be on the legislative level in Washington D.C. and Sacramento.

If you want change that rebalances the industry more toward subscribers then petition your state and federal representatives for legislation that increases choice, encourages competition, and develops a subscriber bill of rights.


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