Lawsuit Against Cable Companies For Not Offering A La Carte Channels Dismissed

from the choose-your-own-reason-why dept

Two years ago, a class action lawsuit was filed against the cable companies for not offering a la carte channels. This is an issue that gets people up in arms -- even as studies have suggested that mandated a la carte would cost consumers more (though, others dispute those findings). On the whole, I think that a la carte offerings that let people choose their own channels would certainly make consumers much happier (a good thing), but I have trouble believing that it should be mandated by the government.

So does the district court where the lawsuit was filed. It's now been dismissed, with the court saying that the plaintiffs failed to show the harm to the market. Of course, the case will be appealed, so this is a long way from over.

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Congress Slams Kevin Martin For Abuse Of Power

from the good-thing-they-waited-until-he-was-done dept

FCC boss Kevin Martin is nearing the end of his tenure at the FCC, looking ready to jump into a lucrative industry job or (some have speculated) explore the possibility of running for elected office. We've been among his many critics over the year -- specifically for his rather blatant efforts to side with the telcos, even when his views are exactly the opposite for telcos when compared to cable companies. The worst, however, may have been his awkward attempt to not just bury an analysis that showed that a la carte cable would be more expensive -- but to come out with a totally different report claiming the opposite.

Congress has now released a report slamming Martin for widespread abuses of power during his chairmanship, noting his efforts to force the FCC to bury the original report and publish the new report. He ordered the group to rewrite the report with the opposite findings and demoted the guy who wrote the original report. The Congressional report also noted that Martin had failed to properly oversee various telco slushfunds. You know all those extra "fees" the telcos charge? Basically it all goes into a big fund controlled by the telcos (not the gov't) with almost no oversight. The Congressional report specifically dings Martin for his oversight (or lack thereof) of the Telecommunications Relay Service Fund. Apparently, Martin ignored plenty of evidence that the telcos were overcharging, and let them just keep collecting. And, on top of that the FCC did little to actually audit the program.

It's also worth noting that Congress decided to release the report without holding hearings, noting: "due to the climate of fear that pervades the FCC...we found that key witnesses were unwilling to testify or even to have their names become known." Good thing they got that figured out just about a month before he's leaving office...

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Why Mandate A La Carte Cable When It's Happening Online Already?

from the just-let-it-go dept

We've been among those who think that the government shouldn't be forcing cable providers to offer a la carte channels. While people always insist that if they got a la carte cable, it would be cheaper, the facts are quite different. The economics of providing a la carte through existing systems would greatly increase overhead, and make it difficult to make things work. Most people would end up paying the same or more -- but for fewer channels. Those who are complaining might be better off recognizing that when they pay for cable they're effectively just paying for what they want -- and the other channels are freebies.

Or, they can just realize that a la carte TV is coming without the need for government interference. Adam Thierer notes that there's a growing movement of folks realizing that you can get an awful lot of television programming (legally) online these days. It's reaching the point where we're finally moving towards a world that we predicted years ago that shows are independent of channels or TV providers, and you can just get them directly online. That's already leading some people to ditch TV service entirely, knowing they can get plenty of shows they want online -- and all of this is happening without the government getting involved at all. So, can anyone explain why it still makes sense for the government to get involved here?

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Yet Another Report On Why Forcing A La Carte Cable Is A Bad Idea

from the think-it-through dept

If there's one topic that we regularly discuss that many of our readers (even those who agree with us on most other things) disagree with us on, it would be mandatory a la carte cable. We've explained repeatedly why forcing cable companies to offer a la carte cable is a bad idea that would likely lead to higher prices and less choice. Yet people still argue against it, claiming (incorrectly) that they would just order a few channels and prices would decrease. Instead, those fewer channels would inevitably cost a lot more (if they were still available at all) because a la carte pricing for channels reduces demand for individual channels, resulting in higher (not lower) prices per channel. Jeff Eisenach and Adam Thierer have put together a short report looking at the problems of a la carte cable, and noting that even if the intentions of those supporting mandatory a la carte cable are strong, the end result isn't likely to be what they'd expect.

On top of that, it's probably worth pointing out that this debate may soon be moot anyway. As we move increasingly to a world where most TV programs are available online, the entire concept of the channel will go away. It won't matter what channel a particular program is on, because you'll just subscribe to that program, and it will get delivered over the internet. In the meantime, though, there's simply no reason to force cable companies into providing a la carte channel selections.

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Advocates Of A La Carte Mandates Misunderstand Infinite Goods

from the bundling dept

Some minority organizations are making the case that a la carte mandates would destroy the market for niche channels. They point out that the market for minority programming like BET and Univision is relatively small, so they (and minority viewers) benefit from being able to tag along with channels that have broader interest. FCC chairman Kevin Martin disagrees, saying that "if a cable operator only wants to carry one channel, it should not be required to buy 10 or 20 channels in order to do so." Martin seems to be thinking of cable channels as tangible products like cars or toasters: if people are only "required" to buy the channels they really want, they'll save money because they won't be "forced" to waste money on other channels they're not interested in. But this argument ignores the fact that television content is an infinite good. The costs of delivering cable content is almost all fixed; once coax has been run to a customer's house, it costs almost exactly the same to provide a given customer with every channel on the cable network or with only one channel. As a result, bundling is economically efficient: throwing in additional channels increases the value of the cable service without imposing any extra costs on the system.

People imagine that an a la carte mandate would mean that if they're currently paying $50 per month for 50 channels, then they should be able to pay $1 per month for one channel. But that doesn't make any sense. Switching a given customer from 50 channels to 1 channel doesn't reduce costs (the other 49 channels would presumably still be produced for other viewers), so why should the customer expect a lower bill? If anything a switch to a la carte actually makes things more expensive because in some cases cable companies have to install new equipment and set up a more complicated ordering and billing system to keep track of who had signed up for which channels. In reality, what would happen is that the cost of each channel would go up a lot. Instead of $1/channel, cable companies might charge something like $8/channel, with each customer choosing 6 channels on average. The result would be that most people would pay about the same for a lot fewer channels.

It's a mistake to think of bundling as being "forced" to pay for channels we don't want. After all, non-sports fans don't get outraged about the fact that they're "forced" to take the sports section with their morning paper. The right way to think about it is that you're paying for the parts of the bundle that interest you, and the rest of the paper is a freebie that doesn't cost you anything extra. It would be silly to demand that newspapers price each section of their paper separately and let you do without the sections you don't want. It's equally silly to demand that cable companies not show you channels you're not interested in watching, since those aren't costing you anything either.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Why A La Carte Cable Will Probably Cost You More

from the read-it-and-weep dept

Every time we write about the push for "a la carte" cable, where subscribers could pick and choose which channels they want, we make sure to point out that studies have shown most consumers would end up paying more for such a system. However, every time we write about it, comments fill up with people ignoring the study and insisting that if they only had to pay for the five channels they like, then obviously it would cost less than the 100 they pay for today. That, of course, ignores how the economics of the business would change if a la carte was being offered. Thankfully, someone over at the NY Times gives a nice straightforward explanation for why your bill would likely go up if we switched to a la carte. And, it doesn't even get into the increased overhead in the infrastructure necessary to offer a la carte, along with the more complicated billing and maintenance required.

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Class Action Lawsuit Filed By People Who Want A La Carte TV

from the seems-like-a-long-shot dept

For many years, there's been a pretty big debate over whether or not cable and satellite TV providers should offer "a la carte" options, where subscribers could just pick and choose the channels they want to subscribe to. At a first pass, many people think this would be great -- believing that it would save them money because they wouldn't be paying for all those channels they get but don't watch. However, this is short sighted. Studies have actually shown that in most cases a la carte offerings would end up costing more.

There are a variety of reasons for this. First, the pay TV providers would need to revamp their systems to support this, including their marketing and customer service setup, which would almost definitely raise costs. Second, what the current bundles do is allow certain popular channels to subsidize other channels. When you switch to an a la carte system, many of those subsidies are lost, and it would likely drive up the prices for many channels, rather than the other way around. So, while some people think it sounds like a good idea, it probably would likely result in a higher cable bill for many people.

However, that won't stop the class action lawyers from getting in on the action. A new class action lawsuit has been filed against the major cable and satellite providers, claiming that it's a violation of antitrust law that they don't offer a la carte channel selection. You can certainly see why some people would want it -- but it's unclear why pay TV providers should be forced to offer it. Either way, with the pace of change, it won't be all that long before this doesn't matter anyway -- and the entire concept of the channel is dead. We're reaching a time when people will simply subscribe to shows, and no one will worry about channels any more.

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