Michael's Insight

Hey Mr. Newspaperman! You Think A-La-Carte Makes Sense?

More Misunderstanding About A-La-Carte [Los Angeles Times]

Here we go again.  Now LA Times columnist and newspaperman David Lazarus thinks consumers would be better off if the Federal government required cable operators to offer all of their channels on an a-la-carte basis. You can read my previous posts and my guest blogger, Gerry Laybourne's, that argue that the cost of television would rise dramatically under government-imposed a-la-carte and the diversity of choices would all but evaporate when scores of niche networks simply cease to exist.

Let's use Mr. Lazarus' example to understand the economics.

The average U.S. home now receives a record 118.6 TV channels, according to a recent report from Nielsen Co. But the dirty little secret of the cable industry is that the average subscriber watches only about 17 channels regularly...

...When I watch TV, it's usually CNN, CNBC or a movie channel. On an a la carte basis, I could probably get the handful of channels I like for pocket change.

Ok.  We believe the studies that suggest that, on average, fewer than 25% of the population would subscribe to any particular channel, like CNN or CNBC.  Let's just say that news and movie channels that are on basic cable, on average, cost cable operators about 50 cents per month, each.  Today, those channels receive that 50 cents per month from all expanded basic customers.  If only 25% of the customers actually were willing to pay for the channel, they would each have to charge about $2.00 per month, just to stay revenue neutral.

But that's only half the story. 

We also know that most networks rely on both subscriber revenue and advertising revenue and about half of their revenue comes from advertising.  We also know that a great deal of a network's viewing comes from channel surfing, so their ratings for advertisers are enhanced by that viewership.  Many people estimate that each channel would lose about 40% of its viewers in an a-la-carte world.  A proportional reduction in advertising revenue, reflective of that lost viewership, would require the network to charge customers another $.80 per customer just to stay revenue neutral.  ...

Studies say net neutrality regulations will raise broadband prices

‘Net neutrality’ could raise broadband prices [Financial Times]

As the European Parliament considers changes in telecom law, two studies are set to be released that indicate that imposing net neutrality regulations stands to drive up the cost of broadband to consumers. One study has been commissioned by the telecom industry and another was written by the Centre for European Policy Studies.

An industry-commissioned report from consultants at Copenhagen Economics, due to be published next week, is set to warn that imposing net neutrality in Europe will “pass on the cost of scarcity to all consumers” and significantly increase broadband prices. That, in turn, could depress broadband demand.

It appears that Europeans have discovered that creating additional regulations that restrict responsible network management has a deleterious effect on broadband consumers. I'm looking forward to seeing both of these upcoming reports on this issue.

Back to the future - Customers getting rabbit ears

Antennas up in TWC-LIN feud Buffalo Business First

You'll remember that I wrote earlier this week about the retransmission consent dispute between cable operator Time Warner and LIN TV. A week ago, LIN TV's broadcast station signals were pulled off the air in several Time Warner markets. In Buffalo, Time Warner has been handing out rabbit-ear antennas to customers, so they can watch the broadcast stations over-the-air. Time Warner has handed out over 25,000 rabbit-ear sets in Buffalo in the last week.

But this temporary solution is the perfect example why cable operators have asked the FCC for a quiet period on retransmission consent agreements around the digital transition. While rabbit-ears work for over-the-air television viewing today, next February, viewers will need more than just rabbit-ears to pull in a digital broadcast signal.  Confusion and the potential lack of digital converter coupons, as suggested by FCC Chairman Kevin Martin, (which I wrote about yesterday) make this short moratorium of pulling signals absolutely critical to a successful transition.

Shame on you AT&T!

AT&T has stooped to a new low by running "confusion" ads in Louisville, KY.  The ads obviously were designed to suggest that their bundled pricing is more of a guarantee than ours.  Nothing could be further from the truth. 

We sent a letter to AT&T asking them to stop misleading consumers and guess what -- their lawyers refused. 

I'll be specific and you judge for yourself.

Usage Caps and Notification

Terry asked the following question:

I would like to know how people are going to be notified if they are close to their cap? It would be nice if I received an email saying I was close and needed to stop (downloading) for a while, rather than getting a large extra charge on my bill.

I think that's a very fair point.  As I've said in previous posts, we don't have any specific plans at this moment to implement caps.  But I also said that we are watching developments on that subject where Bend Broadband and Time Warner have announced their specific policies.

Because usage patterns are growing so rapidly, most ISP's are forced to consider an alternative policy to the one-size-fits-all charges. 

Customers comment on Broadband caps and metering

Dualsub2006 expressed a concern about usage caps:

Any thoughts of a 40GB cap in Insight land will NOT go over very well.

I hear you and as I have previously mentioned, we currently are not planning any changes in the way we charge customers for their Internet usage. Did I leave the door open to changing that in the future?  Yes I did.  We are keeping a watchful eye on increasing usage patterns and regulatory, legislative and business movements affecting these issues. 

NYTimes Cable Story and a Rash of Bash

Thanks to Saturday's New York Times article on cable rates, there was a rash of cable bashing going on this weekend.  Blogs all over the place, especially from Silicon Valley, piled on.

In one of my first posts, I admitted that I read certain blogs even before I read the New York Times.  I guess one reason for that is because they're all to be taken with an equal amount of skepticism -- not just the blogs but the Times too.

Cable Rates