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Making a Case for a la Carte

July 22, 2011 | Author: Ibex Marketing

Earlier this year, the U.S. Ninth Circuit Court threw out a class action antitrust lawsuit (Brantley v. NBC Universal) that held that bundling of cable channels unfairly forces consumers to pay for programming that they don’t want. The ruling stated that while consumers may be damaged by the practice, there is not evidence that competition suffers (which is the basis for an antitrust suit). Now a bunch of groups — including the Parents Television Council, the Consumer Federation of America, and the American Antitrust Institute — have filed briefs requesting that the Court reconsider the dismissal. There’s no indication whether or not they will be successful in resurrecting the lawsuit.

It is interesting that the groups are attacking subscription bundles based on antitrust reasons; cable companies were given monopolies initially to encourage them to take on the expense of an infrastructure build-out. It’s not at all clear how much you would save with a la carte pricing in any case; if the cable companies split out the management and maintenance costs as a baseline expense, the actual amount paid for many of the unwanted channels might not save much. On the other hand, if many subscribers chose to get just a few of the more expensive channels, the loss of revenue to the cable companies might be devastating.

The other part that I find interesting is that there are not many ways for consumers to “vote with their wallets” in this situation. It’s a take-it-0r-leave-it situation for most people, with the only alternative being just over-the-air broadcasts. The rapid uptake of broadband and online streaming of video appears to be offering an alternative for some, and that may eventually be the wedge that helps break up the bundles.