Cable TV

“Because prices move inexorably toward the free, the best move in the network economy is to anticipate this cheapness.”
Kevin Kelly

Finally, some good news for those promoting financial responsibility, USA Today is reporting that Americans are dropping cable TV subscriptions at record rates. More encouraging news is they are not replacing those services with satellite TV or telephone services such as FIOS.

As readers of this blog know by now, I consider ditching cable TV as a good way to free up money to pay off debts. It is a luxury not a necessity. Americans are finally discovering an endless cycle of work and spend does not bring happiness. As a nation and as individuals we are finally waking up from a two decade binge of spending to a really nasty debt hangover. We are still a long way from frugality becoming the new cool, as some authors claim, but we are finally heading in the right direction. People are buying into the idea of voluntary simplicity.

There are other economic forces arrayed against cable TV. First the wretched quality of their overpriced services always leaves these companies in a tight race to the bottom of the customer service rankings with airlines and AOL. Why should I want to pay for a bunch of shopping channels and worse to get the History Channel and ESPN? My wife would ask the same question, substituting Animal Planet and the Hallmark Movie channel. The American consumer has been demanding ala carte cable service for years. Because the cable TV companies are close to being natural monopolies, they have consistently ignored their customers’ desires.

Sadly, Americans, particularly unemployed Americans have much less in the way of discretionary income. Cable TV is a luxury not a necessity.

Much as I would like to believe this trend reflects a seismic shift in mentality of the American consumer, I expect the truth is that one of Kevin Kelly’s laws is taking effect. The cost of content delivered by a given technology will always tend to move asymptotically towards zero. In Rules for a New Economy, Kelly has traced the course of a number of technologies. When they are first introduced they tend to be affordable. I had cable when I lived in an apartment in Greenville, SC (1977-1978) that was located in a natural bowl surrounded by hills. We could only get one channel with the rabbit ears. From memory, basic cable gave us the three majors, PBS, a religious channel or two, and some trash for about $8.00 a month. Today the average cost of cable runs something like $70 a month, $120 a month for some of the premium services. At some point the customer is horrified by the rising cost or a new technology offers a better product at less cost. Then the price starts to drop, first fast and then really fast, heading towards but never reaching zero. In my lifetime I have seen the cost of long distance telephone service drop from something like $3.00 a minute to 3 cents a minute.

Affordable high speed Internet is becoming a “necessity” much as the telephone, which was first considered a luxury but in time came to be seen as a necessity. More and more shopping, bill paying, and financial services (such as banks and brokerage houses) are assuming their customers have access to high speed Internet. I have discovered that even in rural America, satellite Internet is the wave of the future. Free Internet services such as HULU are providing a huge range of television entertainment that is both free and available 24/7. Netflix provides downloadable movies at an extremely reasonable price. “Renting” the movies on line that you really want to see is far cheaper than paying for a bunch of junk you really do not want to watch. New technology is making it easy to integrate the Internet into a home entertainment center. People are cutting the cable.

From the article “More Customers Drop Cable TV; Is Internet or Cost to Blame?”
By Peter Sevenson

Thomas Clancy Jr., 35, in Lon g Beach, N.Y., canceled the family's Cablevision subscription this spring. He said he has been happy with Netflix and other Internet video services since then, even though there isn't a lot of live sports to be had online.

"The amount of sports that I watched certainly didn't justify a hundred-dollar-a-month expense for all this stuff. I mean, that's twelve hundred dollars a year," Clancy said. "Twelve hundred dollars is ... near a vacation."