Changing the channel on cable costs
With hundreds of channels and a whopping cable bill, one wonders why customers pay for so many shows they don't watch.
NEW YORK (CNNMoney.com) -- You bucked up for cable so you wouldn't miss Monday night football on ESPN, but why must you also pay for SOAPnet?
Broadcasters and cable providers offer programming in bundled packages that group more popular channels with lower-rated offerings. They claim it's to keep prices down, but consumers are tired of paying for channels they don't need, and the government may step in.
For example, Viacom (Charts, Fortune 500) packages its big hitting channel MTV, with MTV2, BET, VH1, VH1 Classic, Country Music Television and the gay-and-lesbian themed Logo channel, in addition to Nickelodeon and Nick at Nite.
Not a Designing Women fan? Too bad. In order to get MTV, cable customers must opt for the entire package - and pay for it all too.
"Tying and bundling of programming is a raw deal for consumers who are forced to take and pay for channels that they may not want and where they have no choice," said Matt Polka, president and CEO of the American Cable Association, which represents hundreds of small cable TV operators.
But the cable TV industry argues that bundling, as opposed to "à la carte" channels, offers customers a selection of channels that aren't strong enough to stand alone.
Furthermore, switching to an à la carte system could drive up prices since it would raise the costs of billing and marketing and necessitate an increase in customer service, the industry has said.
"Government-mandated à la carte would be a losing proposition for consumers because of higher prices, less choice and less programming diversity," said a spokesman for the National Cable and Telecommunications Association, a trade group for the cable television industry.
But cable providers may soon be forced to tune in to a new regime.
Last week, antitrust lawyer Maxwell Blecher filed a lawsuit against every major cable operator, including NBC Universal, Viacom, Walt Disney (Charts, Fortune 500), Fox Entertainment Group, Time Warner (Charts), Comcast Cable Communications (Charts), Cox Communications, DirecTV Group (Charts, Fortune 500), Echostar Satellite (Charts, Fortune 500), Charter Communications (Charts, Fortune 500) and Cablevision Systems (Charts, Fortune 500), claiming that bundling channels is an example of monopolistic behavior.
Blecher argues that cable customers should not have to pay for the channels they do not want and do not watch.
"Antitrust law has traditionally made unlawful bundling or tying which precludes consumer choice. Our complaint rests on this historic antitrust jurisprudence. It seeks primarily to bring about change so that consumers can order only those channels they want to watch," Blecher said.
He cited a recent FCC report which concluded that if à la carte options were available consumers would save $100,000,000 per year.
Meanwhile, Federal Communications Commission Chairman Kevin Martin is investigating whether cable providers should be barred from selling channels only as bundled offerings.
"Some consumers, and I am one of them, enjoy a large number of channels. But not everyone does. An à la carte regime would enable viewers to buy their television channels individually, in smaller packages, or in the large packages currently offered," Martin said in a statement.
"I believe that these forms of channel choice could provide all consumers the ability to lower their cable bills and to have greater control over the programming that comes into their homes."
As the FCC aims to bring this issue to the forefront, Polka predicts that it could mean the beginning of the end for package deals.
Of course the largely consolidated programming industry represents a powerful force that will fight long and hard to maintain the status quo, Polka added.
Which means it could be a while before the channel changes.
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