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SBJ/June 9 - 15, 2003/Opinion
Cable’s new offering: A boost from the feds
Published June 9, 2003
We shouldn't be surprised that the CEOs of many U.S. cable companies are pleading with Congress to protect them from big, bad ESPN. Their livelihoods historically have depended on a cozy relationship with their partners in government, so it was a safe bet they would turn to Congress for protection from the evil sports-broadcasting empire.
Still, it's galling to see captains of industry crying for federal relief from contracts they freely signed.
Many cable companies, appalled that ESPN is actually following through on its contractual right to raise its rates by 20 percent a year, want Congress to force them to do what they don't have the guts to do themselves: put ESPN and other high-priced sports channels on pay tiers where they would be bought only by the people who actually want to watch them.
Powerhouse ESPN doesn't want that to happen, and its current contracts forbid such a move, but the cable companies are being squeezed on the other side by customers balking at rising cable rates.
This is exactly the sort of tension that the marketplace will resolve when a willing buyer and a willing seller come together. At the retail level, the cable company charges what it thinks the market will bear, and the customer pays what he judges the product is worth. The transaction between cable channels like ESPN and cable companies like Cablevision and Cox Communications works the same way. Highly desired channels seek to raise their rates, and cable companies try to hold down their costs. Somewhere the lines of supply and demand intersect, and the price is set.
The cable companies, though, have developed an unhealthy reliance on governmental protectionism. Traditionally, local cable firms have functioned as legalized monopolies, operating under city-granted charters that both allowed them to impose regular rate increases and sheltered them from competition. Now these same cable firms, with newfound concern for their retail customers, want Congress to carve out new protections that would cushion them from marketplace forces at wholesale.
That's not the way it works. If cable companies believe ESPN (or any other channel) is charging more than it's worth, they've got the opportunity to make their point the next time they meet for contract negotiations. Or they can drop the channel and explain it to their subscribers.
While it's telling that television has such a high level of importance in our society that legislators debate the availability and pricing of certain channels, the solution to this dilemma should be found in the marketplace, not in the halls of Congress. Government oversight is needed in many areas of society. Deciding who gets which cable channels isn't one of them.