Hey Cable, What Happens When You Can’t Raise Prices Anymore?

Cord-cutting, never-cording and so-called over-the-top video consumption decisions (Netflix, Hulu, et al) are seriously impacting the long running cable-bundling model. That model has two interrelated components which have rarely been considered together.  First, of course, is the ever-growing revolt over ever-increasing network and broadcast carriage fees. (This comes courtesy of the programming conglomerates which kept adding new networks. Originally a ploy by operators to avoid paying so-called retransmission fees, the apple cart got upset when the laws changed leaving operators to pay for both … more and more every year.)

Now the Federal Confusion Commission (FCC) has further exacerbated the revolt as it has highlighted pricing of set-top boxes (STB) as a serious issue. High “rental” fees for STBs and more per-sub fees for programming very few watch has pushed video entertainment bills past the torture threshold.

So, like Ed Martin’s friends and family my friends up the hill are cutting that cord with PlayStation replacing DirecTV. (Plenty of sports; no broadcast channels!) Add that to Consumer Reports’ cable vendetta and too many blogs to count and the anecdotal evidence keeps growing.

But is it real? Could the FCC’s STB folly help push that over the edge? Could the proliferation of so-called mini-bundles (a laXfinity/Stream, DISH/Sling or Time Warner Cable’s broadband + Showtime/HBO) halt the rising cost of the so-called cable bundle? Well, the subscriber erosion is real. Video consumption patterns are clearly changing.

Still, it could take quite a long while to have a serious, lasting impact. STBs are not going away tomorrow.  After all, it is pretty hard to run trucks and change out some 98.1 million subscribers. (That counts all three distribution forms -- cable has 53 million – and doesn’t assume any contractor keeps his appointment.)

Still, yes, as Brian Barrett headlined in Wired, “Cable Boxes Suck.”  So do the satellite and telco boxes.  But change takes time and Barrett’s complaint about Comcast refusing to automatically authorize a TV everywhere product from Starz, thus bypassing Comcast’s regular Starz carriage contracts by creating a direct app, is pretty silly.  It’s the nature of toll roads, folks (for example, proprietary spectrum use) and it takes a lot more than indignant declarations to change them.

But let’s step back a little. What could fix the high cost “problem”?  A Federal rule to force a la carte pricing?  (That is, you pay only for what you watch.)  Well, Canada’s version of the FCC is more or less sort of trying that this year.  Wait and see what happens up North.

Meanwhile, the anecdotal pressure is sure to continue.         

Random Notes

It ain’t just cable that provides STBs.  And it ain’t just cable that has complicated contracts with programmers. That should be “cable/satellite/telco.” Cable gets enough bad press (often deserved, just not this time).

Meanwhile, the FCC has its hands full with opposition to its STB proposals.  Earlier this week, the FTC, a large number of programmers, more associations and a number of Congressfolk have weighed in against the proposals. Besides, they make no real sense.  But lots and lots of folks from Google have been visiting the White House … some 427 since Obama has inhabited the place.

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