Latest posts by S.T. Karnick (see all)
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- Almost Half of State Health Insurance Exchanges Are Fighting for Survival - May 25, 2015
- ‘Sons of Liberty’: Historically Inaccurate, Surprisingly Relevant - January 29, 2015
U.S. Sen. John McCain (R-AZ) “wants to let [cable and satellite TV] customers buy their pay channels on an a la carte basis,” The Wrap reports. That is certainly an option many customers would like to have, but McCain’s bad idea is to use the heavy hand of government to make it happen.
At present the market does not provide this option, the Wrap report notes, because the providers of popular content (such as ESPN, the Discovery Channel, and the like) force the cable and satellite distributors to take less-popular channels along with the more desirable ones. This raises prices for everybody. The Wrap’s wording implies that cable companies like this arrangement, though I greatly doubt that they do:
Under the current system, cable companies charge customers for bundles of channels. In turn, media companies package their content to cable providers so that they are forced to pay for less popular channels in order to get access to more desirable ones like ESPN or AMC.
Instead of letting the market sort this out—which technological change is making inevitable as people’s TV viewing increasingly is done via the Internet instead of or in addition to cable, satellite, and/or broadcast services—McCain wants to put the burden mainly on one party, the cable and satellite providers:
The Arizona Republican is preparing legislation that would let cable customers buy channels individually, according to a report in The Hill.
That phrase “would let cable customers buy channels individually” is both telling and inaccurate. It’s revealing in the use of attractive wording to describe a government mandate, and it’s false in the implication that government can “let” cable customers do this. It cannot; it can only force cable companies to let cable customers buy the channels individually. That is a very different thing altogether, and it will have additional consequences, as we shall see.
McCain’s bill would put some pressure on some programming providers. It would forbid broadcast networks from forcing cable operators to buy the broadcasters’ non-broadcast cable channels in order to get the broadcast channels, thus making it easier to sell them separately. It would also end the sports blackout rule and pull the licenses of broadcasters who remove their programming from broadcast airwaves in order to avoid it being picked up for free by Internet redistributors, which some are considering doing.
McCain’s plan is certainly well-intended, but it would just be more clumsy government intrusion in things that don’t respond well to brute force. Requiring cable operators to offer channels individually, without also requiring allcontent providers (not just broadcast networks) to unbundle their programs will at best have no effect on prices and at worst will drive up prices and reduce access to programming. In fact, forcing unbundling will almost certainly reduce cable consumers’ access to programming.
Consider the microeconomics of the matter: the cable operator will have to offer the channels individually, but it will still have to pay for many channels en bloc, which means that someone will still have to eat the cost of the unpopular channels. That unlucky party will be the consumer, because what the cable operator will have to do is price the individually offered channels and/or customized tiers at a level that will ensure a profit or go out of business.
That means the customers will still end up paying for the unpopular programs, or the cable companies will shut down, reducing availability of the services. And to the extent that the scheme is successful in forcing unbundling, it will certainly reduce access to programming because the less popular channels will have much less appeal for the cable provider. That consequence, you may be sure, will result in further government intervention to force cable operators to provide the less-popular channels. Prices will “necessarily skyrocket,” in then-Sen. Obama’s famous words, or cable operators will have to leave the business altogether.
A more sensible approach would be for Congress to remove broadcast exclusivity, must-carry, and other such market-distorting laws and regulations and allow the providers and customers to determine what is offered and at what price points. That would provide the best services, lowest prices, and broadest access to programming, but it would require lawmakers to acknowledge that they’re not smarter than the cumulative choices of nearly 300 million people. Hence, it’s exceedingly unlikely.