Real Analysis of Cable's Value

I wonder if the headline of the FCC's recent report on cable prices had said, "Consumers Watching More Cable, Cost of Actual Viewing Going Down," would we have seen stories in most newspapers suggesting that cable customers are receiving a better value?

Probably not, but a true analysis of today's marketplace would reach those conclusions.

I wrote in this space a few weeks ago about how perplexed I was that the NCTA was required each year to file a report demonstrating that the marketplace was "competitive" for multichannel video. Yet just after that column was published, we encountered another baffling episode in which the FCC released a two-year-old report on cable prices containing several inaccuracies that I have asked the commission to correct.

The first fact that's obvious to most Americans is that cable programming is more popular than ever.Consumers are spending more and more hours watching cable networks. For the fifth consecutive year, ad-supported cable is leading the six broadcast networks combined in primetime viewership, with household shares of 55.4% versus 40.4%. And last year, cable channels combined outrated the broadcast-network channels on four out of seven nights of the week.

It follows that as consumers watch more cable-network programming, it becomes an even better value. In fact, when the real price per viewing hour is calculated, consumers today pay less for their video service than they did four years ago.

Check this out: If you divide the real price of a cable subscription by the number of hours used per month, the cost per hour is less — about 26 cents per viewing hour in 2005 versus 28 cents in 2002, adjusting for inflation. And if you look at the price of cable on a per-channel basis, while inflation grew more than 20% from 1995-2004, cable's per-channel costs grew only 10.8% during the same period.

And let’s not forget the cost savings and value of the bundle. When video, high-speed-Internet and voice service are purchased together, the bundle costs 23% less than the inflation-adjusted price of 10 years ago. In 1996, adjusted for inflation, it would have cost $129 to buy local and long-distance phone service, 46 channels of cable and incredibly slow 28-kilobit-per-second Internet access. That’s compared to today’s typical introductory bundle, priced at $99, where the consumer gets many more channels, dramatically faster Internet access and fully featured phone service.

Hmmm: more channels, better services and higher usage. Now that sounds like a story most consumers would like. Competition is working, and consumers win.