Public Knowledge is on the other side of a lot of public policy issues from Verizon. That said, Verizon's new “Custom TV” plans are a move in the right direction. It’s great to see a company announce–and then launch–a new approach that is good for viewers, good for the provider, good for competition and ultimately good for programmers, as well.
The “Custom TV” plans aren’t perfect, and they're not quite à la carte. But they can allow some viewers to lower their bills and increase the amount of control they have over the programming they pay for. That’s a good thing.
Of course, there’s a reason why a company like Verizon would move first to offer packages like this. Even though you can trace Verizon’s corporate history back to the Bell System, when it comes to TV, it’s the new entrant compared with big cable. Most cable companies don’t face much “overbuilder” competition–sometimes cable companies like RCN come in and serve the same territory as an existing cable company, and sometimes cable companies face competition from telcos like Verizon or AT&T that offer a broadband/TV package. (Most cable companies face TV competition from DISH and DirecTV, but the broadband/TV package is most appealing to many customers, and satellite companies can’t compete there.)
But Verizon competes with cable in all the areas it serves. As a result, it has to work harder than cable to win customers. These new TV plans are part of that, and are an indication that, however slowly, the industry is moving in the direction of more consumer choice. It’s not just that online video unlocks a lot of potential competition–the traditional pay TV companies are going to have to adapt, as Verizon is starting to do. More choices from every kind of video provider, including traditional ones, will benefit viewers.
But some things could stand in the way of this–for example, if Comcast buys Time Warner Cable, its ability and incentive to prevent its competitors from offering more consumer-friendly plans would increase. There are hints of how that might work happening already.
Since Verizon announced its plans, a number of programmers have complained. They say their contracts with Verizon mean they have to be included in every subscriber's package, instead of as optional add-ons. If you're a programmer, it's better for your bottom line when every subscriber is required to pay for your product, instead of deciding whether your programming is worth the price. Large programmers like ESPN have the leverage to demand that their programming be included in every subscriber's basic package. If a pay TV provider wants to carry ESPN at all–which is pretty much a necessity–it can demand these terms. To make things even better for the large programmer, viewers naturally blame their pay TV company, the company that actually sends them a bill, for the high costs and bloated channel lineups that are endemic to the pay TV industry. If nothing else, then, these events have been a helpful reminder that there's enough blame for high TV bills to spread around. Pay TV providers and large programmers both are responsible.
Not having seen Verizon's programming contracts, I can't comment on who's in the right in these dispute legally–though I'd hope that programmers end up joining Verizon in realizing that it's in their long-term interest to give customers what they want, instead of forcing them to pay for what they don't want. But one programmer's complaints in particular should be called out: NBC's. That's because Comcast, a Verizon competitor, owns NBC.
It seems anticompetitive that Comcast, through NBC, should be able to prevent Verizon, one of its competitors, from offering new, more flexible TV plans. Unlike the complaints from ESPN (which is owned by Disney, who also owns ABC) and Fox, when NBC complains about a TV distributor's practices, there's at least the appearance of a conflict of interest.
The current dispute between Verizon and a few programmers highlights an existing and widespread tension between large programmers and pay TV providers. But if Comcast buys Time Warner Cable, its cable TV/broadband business will get bigger relative to its programming business. Comcast's incentive to use NBC programming in ways that benefit those businesses would therefore get bigger. In addition, as the largest cable provider, the plans that Comcast itself offers its subscribers would de facto be the industry standard. This would make it harder for other pay TV providers to differentiate themselves, and give large programmers another way to resist change.
The current dispute between NBC and Verizon might therefore only be a taste of things to come. Comcast shouldn't be able to prevent its competitors from trying to offer better services. This is one more reason why the FCC and DoJ should prevent it from taking over Time Warner Cable.
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