Cable, Satellite TV Bundles Near a Breaking Point
The scheduling of today's column is new; its content, however, should seem familiar.
First, that timing: The piece is on our Web site today, but it won't appear in print until Sunday, when it will grace the Business section along with my Help File Q&A column. The idea here isn't punish our print subscribers; I'm one myself; yes, it does feel a little odd not to see my column in print this morning. Rather, we're doing this to work around one side effect of The Post's merging its Business and A print sections--the move of most non-policy-oriented Business columns to Sunday.
More people visit our site on weekdays than on weekends, and I also compete with two guys whose columns run on Thursdays. So instead of following the usual newspaper Sunday-column routine--file the piece on Friday, then wait two days for it to appear in print and online--I file my column on Thursdays, so we can get it online the next day.
(Also relevant: If you're going to have deadlines tear up your non-work schedule, it's better to have that happen on Thursdays than on Fridays.)
So there you have it. As for the content of today's column--griping about the cost of cable and satellite TV is not exactly unusual for me, and I suspect it's not unusual for you either. (Scroll after the jump for a 2004 rant about cable-TV inflation.)
But in recent years, it's gotten easier to watch TV without paying $50, $60 or $70 a month. I have had outstanding results with digital TV, and there are far more Web options--from Amazon to iTunes to Netflix to Hulu and beyond--than we've had before. (Even if getting that content onto a TV screen continues to be a little tricky.)
Enough people have canceled cable or satellite TV for the business to have settled on a phrase to describe this phenomenon: "cord cutting." (See, for example, testimonials of two former Posties; one switched to Web-only video, while another now relies on a mix of Web video and over-the-air DTV.)
I'm seriously considering this option myself--though sports programming remains a tough issue to get around. (It would not be such an obstacle if sports leagues would end pointless, obsolete blackout rules that restrict online video access to people who live outside a team's market.)
I don't see how cable and satellite TV providers can stay competitive with the flexibility and low cost of online viewing by charging viewers ever more for ever-larger bundles of channels that nobody has any time to watch. They need to think small here, not big: Let viewers pick and choose the channels they want.
Years ago, cable operators could credibly object that "a la carte" cable would require them to migrate their systems to an all-digital setup.
But they've now completed most of that transition--analog cable is pretty much dead for anything beyond basic service.
There's still an economic argument--but somebody needs to explain why Canadian cable operators, which have offered "a la carte" options for years, have not gone bankrupt as a result. (In my column's comments, reader "rsh43" notes that when he or she lived in Quebec, the cost for a customized bundle of 20 channels was only about $25 Canadian.)
We can talk about this during my Web chat--starting at noon today. Meanwhile, let's continue the conversation in the comments: What channels would be in your own personalized bundle? Which ones would you be happiest to dump if you could customize your TV service?
Published on: Sunday, 2/22/2004, Business section,
edition, zone, F07
Strung Up With Cable TV
By Rob Pegoraro
When I awoke more than a week ago to hear that Comcast, the cable giant, proposed to buy Walt Disney Co., I couldn't help wondering: If this company could find enough change under the sofa to buy one of the biggest names in Hollywood, haven't I been paying too much for cable?
My own financial records say as much: Since 1997, my monthly bill for expanded basic service plus HBO has gone from $44 to $70, including taxes. That's in line with the 40 percent increase in cable rates from 1997 to 2002 that the General Accounting Office reported last fall, a price hike "well in excess" of the 12 percent inflation rate over that period. Why is this service not following the better-faster-cheaper path of the rest of the telecom universe?
My cell phone costs less than it did in 2000 and now works across the country without roaming charges while providing me with free long-distance calling. My Internet-access costs have gone up, by $10 a month -- but in return for upgrading from a dial-up account on a second phone line to a DSL connection, I've seen an 11-fold increase in speed.
Satellite-TV customers have benefited from this trend too. DirecTV reports that, since it began carrying local broadcast channels in the Washington area in late 1999, the price of its equivalent of expanded basic plus HBO has dropped $2 a month, to $52.
Meanwhile, cable prices have remorselessly ratcheted up every year, as if they were college tuition rates, health care premiums or property taxes. This has been good for Comcast, which netted a 38 percent "operating cash flow" margin last year on its cable services. But what about the rest of us? Why do cable rates stay so high?
Brian Dietz, the National Cable and Telecommunications Association's senior director for communications, pointed to three factors (after expressing surprise at the size of my cable bill): programming, customer support and system upgrades.
The price of content has definitely gotten out of whack, up by as much as 34 percent from 1999 to 2002, the GAO found. Sports broadcasts increased the most, up to 59 percent. (One reason, the Federal Communications Commission noted in a study three weeks ago, is "rising players' salaries" -- yes, part of this is George Steinbrenner's fault.)
But cable and satellite operators are in the same boat: About a third of Comcast's operating costs last year went into programming, but DirecTV had to spend still more, about 40 percent.
Another reason is escalating customer-support expenses, as cable operators have added 24-hour, toll-free help desks. But this isn't unique to cable either.
The best explanation lies in cable operators' system upgrades and rebuilds -- $85 billion worth since 1996, Dietz said. This has allowed them to offer such add-on services as digital cable, video on demand, high-definition TV, Internet access and even telephone service.
As a result, cable has become a tough rival to Verizon in Internet access; it also has rolled out much better video services. But is it fair to pass the costs of these extras on to people who aren't using them? Verizon, which lives in a stricter regulatory environment, couldn't do this; jacking up phone rates to cover upgrades to its DSL or wireless operations would be illegal.
Comcast's corporate communications director, Tim Fitzpatrick, said the ability to upgrade to these extra services is itself of value and worth paying extra for: "It's choice, convenience and control," he said Friday.
Focus on that first factor when you decide what to do about cable's cost. If you can get DSL or another non-cable broadband Internet service and can receive a satellite signal, you don't need cable. So get rid of it. Satellite does the same job as cable TV for a lot less, which is why it has gobbled up about 22 percent of the so-called multichannel video market since 1993.
If your home is like mine, without the clear view of the southern sky needed for satellite TV, you're still not totally out of luck. The biggest secret in the cable business is that you can purchase just basic cable, then add HBO, Showtime or another pay channel, sparing yourself the $30-and-up cost of expanded basic service.
Last, you can always retreat to over-the-air TV. Or not watch TV at all.
Neither Comcast nor the cable industry as a whole promises any quick relief from this inflationary spiral. But there are two steps these companies could take.
The easy one would be to give customers more than three or four tiers of programming to choose from, instead of marketing the myth that we should buy TV in 50-channel blocks. (Who has time to watch them all?)
The harder one would be to use their capacity more efficiently by finally retiring analog cable, passing the savings to customers. While digital cable is sold as an extra, each basic-tier channel continues to go out in analog form, sucking up eight or nine times the bandwidth of a digitally compressed channel. Only the satellite services and the few built-from-scratch cable systems, such as Starpower, are all-digital -- and, not surprisingly, cheaper.
For an established cable system to go fully digital, all its customers would need digital converter boxes. But even with that hassle, "you could still do basic cable digitally for much less," said Dick Green, chief executive of CableLabs, the industry's Louisville, Colo.-based research and development body.
Then there's plan C for the cable industry: Keep raising prices as if its monopoly still endured, and watch the remaining customers flee to satellite, DVD rentals, the Internet and technologies not even invented yet.
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