Internet

Cable Comes Undone

The great television unbundling is happening-without government help.

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Here's what the Federal Communications Commission (FCC) thought of cable television under the Bush administration: It was too expensive, too vulgar, and too limited in terms of service and choice—and the only solution was to change the way its product was sold, forcibly, if necessary.

From 2005 through 2009, FCC Chairman Kevin Martin waged a small war against the cable industry, arguing that increasingly expensive channel bundles restricted consumer choice and made it difficult for parents to police their kids' viewing habits. Cable TV packages were growing more expensive every year, and consumers had no options except to buy the whole bundle or nothing at all. Parents, meanwhile, had to either decline cable altogether or allow the increasingly violent and smutty cable lineup into their homes.

Cable, in other words, was buffet only. The way to fix it was to require cable companies to sell tiered packages geared toward families, or even individual channels; instead of a bundle, it would be cable a la carte.

From 2005 through 2009, Martin made the issue a priority. One of his first acts as FCC Chair was to order a report that reversed a conclusion by his predecessor at the agency which found that cable a la carte would increase cable costs for most consumers. Martin's report made the case for a la carte pricing, arguing that it would be cheaper and help smaller networks. For the next four years, he continued to voice support for a la carte pricing, and while he often framed his stance as mere encouragement, he also made it clear that he favored making a la carte pricing mandatory..

Under Martin's watch, cable packages and prices became an issue of pressing national importance, with multiple congressional hearings and interest group pressure campaigns. When Martin left the agency in 2009, an FCC brag sheet listed the Chairman's efforts to spur "greater choice in packaging and sale of video programming services" in his top eight achievements.

Thing is, Martin didn't have much success. When he left the FCC post, cable packages were bigger and more expensive than ever. Four years of agency agony had no discernable effect.

Six years later, the issue has been back-burnered at the FCC, if not dropped altogether. And yet the great cable unbundling is finally happening—without any help or prodding from the FCC.

Instead, the Internet has made it possible for individual channels to break away from the cable bundle, and for smaller, less expensive packages of channels and programming to be offered over the web.

In March, for example, HBO announced that it would make a standalone version of its popular streaming app, HBO GO, which is currently offered only to the channel's cable subscribers, available for a fee of $14.99 per month, even to those who don't have cable.

A month earlier, Dish Network, the satellite TV provider, started offering a low-cost package of channels, featuring ESPN and AMC, for online viewing for just $20 a month.

These new services may not seem like big deals, and at least in the short term, the impact will probably be limited. But they are likely to represent a turning point in the delivery of television programming. HBO, with its lineup of high-quality original programming, has for years been the single most desired channel on an individual basis, but has resisted calls for a standalone offering in order to preserve its lucrative deals with cable companies. ESPN, meanwhile, is in some sense the foundation of the cable bundle—a media behemoth that extracted $5 a month from every cable customer. 

With both ESPN and HBO striking out on their own, much of the rest of cable is sure to follow. The traditional cable bundle won't completely disintegrate, at least not for a while, but it will look more and more like one choice among many rather than the only game in town.

Meanwhile, more streaming video services and options are already on the way—most notably a 25-channel offering from Apple, expected to debut later this year. At the same time, original TV shows, which not long ago were the exclusive domain of traditional cable channels, will continue to pop up in unexpected places—like, for example, Sony's Playstation Network, which recently launched high-quality adaptation of the superhero crime comic Powers. These sorts of options, in combination with existing services like Hulu and Netflix, will, as The Atlantic's Derek Thompson recently wrote, allow people to cobble together their own little bundles, built to their own specifications, tastes, and price points.

The great unbundling didn't need government prodding to happen; what it needed was market demand and new technology. Indeed, if Martin had succeeded in his quest to mandate a la carte service, the most likely immediate outcome would have been higher prices for almost everyone.

The initial report that Martin ordered on cable bundling—the one reversing his FCC predecessor's conclusion that prices would rise, and the one which launched Martin's a la carte crusade—was eventually found to have been manipulated in order to reach a predetermined conclusion.

Internal agency emails uncovered during a 2008 investigation by the House Energy and Commerce Committee revealed that, although the economist in charge of the report initially concluded that cable prices would have been higher and small-network viewership lower under a la carte, he was explicitly directed by Martin's office not to reach that conclusion. As an email from Martin's senior legal counsel put it, "The conclusion of this report is supposed to be that a la carte could be cheaper for consumer." The agency's entire push, in other words, was based on a deliberately bogus report.

The saga provides a neat lesson about the difference between industry innovation and regulatory intervention. Given a chance, the market will give consumers what consumers want. Given the same chance, regulators will attempt to give consumers what regulators want.

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45 responses to “Cable Comes Undone

    1. “However, if you’re holding hostages, you kind of are involved in combat?You really don’t get due process or anything like that in a war zone…”

      The exact same thing he said during the filibuster

      1. “Overseas, I have no problems,” Paul said at the time. “If people are shooting at American soldiers overseas, by all means, they get no due process.”

        http://www.washingtonpost.com/…..ght-think/

        1. Interesting; didn’t compare to his previous words…and hate looking at remarks out of context to boot. So this is the media trying to cherry pick and spin this as a reversal(?)

          1. That would be my guess. They don’t know who is going to get the R nomination as yet, so pull up anything that will make someone less popular with primary voters.

          2. Nuance is hard

        2. Good points: the filibuster turned on the question of whether the federal government had the authority to use drones to kill US citizens without any kind of warrant, etc.

    2. I don’t see these positions as contradictory.

      It is reasonable to favor the use of drones in active combat in a declared war, and oppose their use anywhere else.

      The problem with Obama’s use of drones has been their use for assassinations of terrorists, not military combat.

  1. You mean that government intervention isn’t a panacea and that its advocates are intellectually dishonest? Turn on the Shocked-Face Channel.

    Also, why does the market so often fail in the case of cable? I assume that local governments’ franchising policies have nothing to do with it, since the right-thinking people cannot be made to admit that cable franchises are even a thing.

    1. You mean, like having to go beg the city council to grant you a franchise to compete with the local monopoly (also granted by same city council)?

      http://www.startribune.com/loc…..80141.html

      I’m sure this will be spun somehow by the NNtards as a win. They won’t acknowledge that the reason Comcast has a monopoly in Mpls is because the local govt, not the market, has given them free rein.

  2. Why does this article have an april 9th date on it?

    1. And where is your beautiful wife?

    2. Because it was from the May 2015 print edition, which means it was written in October 2014.

  3. THE INFRASTRUCTURE CAN’T HANDLE THAT MUCH STREAMING. Won’t someone please implement net neutrality to make sure everyone can stream?

    1. You are limited to one 320×240 pixel video feed at any given time – to make sure there’s enough banwidth for everyone.

      1. Federal Bandwidth Distribution Committee

      2. Nobody needs high definition video.

  4. In March, for example, HBO announced that it would make a standalone version of its popular streaming app, HBO GO…

    Also, I don’t like that the commoners are now going to have access to the premium programming that I’ve been subscribing to since before The Sopranos changed television forever.

    1. I stopped buying HBO products because it might end up subsidizing Lena Dunham.

    2. I finished ENT last night. Riker got fat.

      1. Terrible finales add ten pounds.

        1. Right?!? Why was the finale Riker watching TV? And they killed Trip. The only Sci-Fi Floridian I know of. Worst. Finale. Ever.

          1. Trip was an engineer who was bad at word problems. It was amazing they got that ship out of LEO without him blowing it up.

    3. They already pushed a bunch of stuff onto Amazon and I was finally getting around to watching the Wire when Baltimore Riots intruded upon it.

      Off Topic, David Simon says rioting is bad.

  5. And along comes ESPN, suing Verizon for offering me the choice to not have ESPN.

    http://www.engadget.com/2015/0…..v-lawsuit/

    (Also, where did the preview button go and why does the site sometimes default to the mobile version?)

    1. And Fuck Bob Costas

    2. Well, it’s a contactual dispute. 21st Century Fox and NBC Universal are also claiming it violates their contract. So we’ll see I guess. I support the ala carte system but clearly the contract prevails here.

    3. Sometimes I get that when using FireFox + NoScript and not allowing js for various cloudfront sites.

      1. That seems to be have the issue, thanks. Also, enough with this Cloudfront nonsense Reason; I shouldn’t have to accept scripts from half a dozen different sites to comment at HnR!

    4. When ESPN and other content providers agree to allow a distributor to carry their programming, among the many details of the contract is what tier of service their channels will be carried in.

      I’m not sure what the Verizon tiers are like, but for a typical cable company, ESPN requires that its channels be carried in the expanded basic package which is the lowest tier package that gets you actual cable channels (the lowest tier package, basic, gets you local channels, cspan, and government access)

  6. It’s striking to me that this idiot is concerned that parents can’t police TV-viewing choices…

    …in 2009.

    Two thousand mother fucking nine.

    News flash: If it’s 2009, even if you completely succeed in giving parents the ability to police TV-viewing choices, it just doesn’t matter, because the kids are all watching Pornhub on their phones anyway.

    All attempts to police the transmission of content in the US are doomed to failure. All of them. Fucking CHINA can’t get this done. How is the FCC going to do it?

    Your kids are going to watch porn. That battle is over. Move on.

    1. You know who else watched Pornhub on their phone?…

      1. I just clicked on it that one time by mistake.

        1. Yeah, and only for 5 minutes:)

  7. I basically mak? about $6,000-$8,000 a month online. It’s ?nough to comfortably replace my old jobs income, especially considering I only work about 10-13 hours a week from home. This is how to start…………… http://www.Jobs-Fashion.Com

  8. roomate’s mom makes $61 /hour on the computer . She has been out of a job for nine months but last month her check was $13778 just working on the computer for a few hours
    This is wha- I do…… ?????? http://www.netjob80.com

  9. Ala cart would have been cheaper for me. I only want about 10 channels, and no sports

  10. upto I looked at the receipt four $4773 , I didn’t believe that…my… mom in-law was realy receiving money parttime from there new laptop. . there aunts neighbour started doing this 4 only twenty one months and recently paid the dept on their villa and bourt a new Car
    This is wha- I do…… ?????? http://www.netjob80.com

  11. my roomate’s half-sister makes $71 /hr on the computer . She has been laid off for 5 months but last month her pay was $17321 just working on the computer for a few hours
    …… ?????? http://www.netjob80.com

  12. Who needs cable when there are great children friendly options like using Netflix which is cheap and allows for separate users to be created. It’s that easy.

  13. Cable TV is the old way of watching TV many people have switched over to Satellite TV and Satellite Internet. That’s why I use DISH Network TV it’s just a all around better deal than using cable.

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