Thursday, May 15, 2014

Unbundling Cable Not A Cost Savings

If you ever thought that your cable bill would drop if your provider let you just buy the networks you watched should read today's New York Times' article on Unbundling Cable.  In it, the writer Josh Barro provides a clear understanding of the cause and effect of a la carte pricing for cable programming.  The conclusion, overall costs would not go down and consumers would eventually pay more for less programming.  Cable bundling overall has helped to keep prices lower.

The only problem is that the article doesn't address the fact that cable subscription costs are still increasing and that lately the cost of bundled cable has led to decisions by some households to cut the cable cord entirely.  So if the solution to lower cable bills isn't unbundling and a la carte pricing, then how else can a household lower their bills? 

For many, a strategy has been to switch providers.  In some markets, like NY and LA, a telco overbuilder like AT&T U-Verse or Verizon FIOS, competes head to head with the incumbent cable provider, Comcast or Time Warner.  Deals are offered to switch and savings mount until the promotional pricing ends and consumers seek new deals to switch back.  Other households look at satellite providers like DirecTv and Dish for cheaper cable programming. But as you can see, the cable industry is monopolistic with few alternatives.  It is the same problem facing broadband access as well.

The challenge of cutting the cord completely to cable and relying on broadband for streaming access to platforms like Netflix, Amazon Prime and You Tube, is that broadband providers want to switch from an all you can eat model to usage based pricing.  Given the heavy load of video streaming, and discussions regarding the demise of net neutrality, costs to stream will rise and so will subscriptions to broadband services.  And frankly, most users want all the content they can get, cable and streaming, and cord cutting doesn't serve that purpose.

So great explanation Mr. Barro on why unbundling cable doesn't work.  But you left out the most important question, how can cable customers save money and still enjoy their programming. 

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