[opendtv] Re: Early UHF in DC and Baltimore

From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
To: opendtv@xxxxxxxxxxxxx
Date: Wed, 03 Aug 2016 07:37:30 -0400

On Aug 2, 2016, at 9:30 PM, Manfredi, Albert E <albert.e.manfredi@xxxxxxxxxx>
wrote:

Every business has to live within its means. The problem was these fees, a
form of taxation, which subscribers were carefully trained to accept,
initially out of the need to pay for a very, very labor-intensive
infrastructure. I repeat: it was trivially easy to see this training course
in action, in the early years.

Yes, nobody was trying to hide the fact that these fees were being added,
although they have never been itemized on subscriber bills, and the exact
amounts are rarely published. But you've got it wrong.

Businesses have many ways to raise revenues.

People willingly pay Netflix for their SVOD service.

People are paying Amazon for Prime, which is a very clever deal. The shipping
fees are paid by the companies selling the products to Amazon as part of the
negotiated price. With Prime customers buy more stuff, and now Amazon uses
Prime Video to sell more programming. The search engine shows you both
programming that is "free" with prime and available for sale and rental.

People started paying for HBO in the late '70s. And they started paying to rent
movies after Hollywood got on board and started releasing movies on VHS. So
please don't try to make these subscriber fees into a tax - they are fees for a
service. There are plenty of REAL taxes on MVPD services, which are itemized.

Subscribers were already paying for cable service. The addition of new channels
was welcomed initially as the additional cost was minimal. As rates started
rising some consumers did object, which led to re-regulation via the 1992 act.

Like I keep saying, it is those running after the cable truck that created
the problem. Any business would love to have a monopoly, and would love to
have people pay for what they don't actually want. That's a given. So, when
this opportunity presented itself, you can't blame the MVPDs for grabbing it.
At the time, the only option would have been for the FCC or local authorities
to regulate this strictly, as they do power and water. But it's not an
essential service. So, light touch.

The problem is not that subscribers are paying for content they want. The
problem is that they ALSO must pay for content they don't want. In anti trust
parlance this is illegal tying. But they got away with it by claiming that the
fees were much lower with everyone paying for everything - that aka carte would
be much more expensive. It worked for several decades, but now we're talking
about real money each month, so some people are upset, and some are cutting the
cord.

And rate regulation has ALWAYS been in place at the local level for franchised
systems. The rationale for raising rates has been the addition of more
channels, which became a key component of the 1992 Act.

The first wave was easy and cheap - filling up the 30 channel 400 MHz systems.
The next phase added about 20 additional channels - most of these channels were
useful but prices did start going up. Somewhere during this timeframe the FCC
added the requirement for lifeline or basic service, which became the broadcast
stations, CSPAN, and some shopping channels.

It was the 1992 Act that unleashed the next phase, which when combined with the
upgrades to digital caused the number of channels and rates to keep growing at
2-3 times the rate of inflation. In 1992 it was already known that digital
cable would happen in a few years, just as Congress knew that broadcasters
would be transitioning to digital. They knew that cable systems would keep
growing, and that the 92 Act would not slow the rate increases. And they knew
that retrans consent would give the content congloms the tools they needed to
take control of the content delivered by the MVPD systems.

President Bush vetoed the bill, but Congress overrode the veto. The rest is
history.

So there was strong interest to develop that second revenue
stream - they had been "giving away" content for too long!

Really Craig? Giving away? Only slight hyperbole?

No hyperbole. Advertising rates kept rising, but the revenue from ads was not
keeping pace with the increased costs for programming. And then ratings started
declining due to competition from cable, which made raising ad rates even more
difficult. The broadcasters saw that people were more than happy to pay for
home entertainment, be it a MVPD bundle or Movies on VHS. So they used their
political muscle to take over the MVPD systems and the new content these
systems were delivering. By the end of the '90s they owned 90% of what we
watch...again.

But cable systems kept increasing prices,

And why wouldn't they? What business, in the same circumstance, would not do
so?

Clearly this became a vicious rather than virtuous business cycle.
Unfortunately it became more vicious when Congress gave the congloms the tools
they needed to regain control of the content business.

A problem created by the close relationship between the politicians
and regulators and the oligopolies they helped to create and
now protect.

Absolutely not. You keep repeating this mantra, and you keep missing the
point. The problem was inevitable, given the economic model, and the model
was inevitable, given the technical realities of the day. The only way out
would have been regulation, same as any other inevitable monopoly, such as
utilities.

Absolutely true. The problem was not inevitable. We have anti trust laws to
protect citizens from this kind of abuse. The problem is that the politicians
are in bed with the content congloms and enabled this perverted economic model.

The unfortunate reality is that consumers are now accustomed to
paying monopoly prices for many services - virtually all utilities.

Sorry, Craig. First of all, utilities are heavily price-regulated.

Yeah right. Just another case of too close a relationship between the service
and the regulators.

Their price increases are typically lower than inflation, and I already
demonstrated that to you. Secondly, not everyone is as well trained as you.
Many are shaving and cutting the cord these days.

Not around here. Our utilities are a disaster - the highest rates for
electricity and natural gas in Florida. And they keep raising rates for water
and sewage to keep pace.

As for cord shaving, it has become well known that you can negotiate pricing,
as I have now done twice. And then there is cord "switching." It is quite easy
to sign up for a different promotional deal every two years. Thus we are seeing
tremendous customer churn. Cable lost almost half its subscribers to DBS. Now
many are coming back to cable and the telcos because of broadband.

What you fail to understand is that the majority of homes in
the U.S. WANT to buy this content.

That's so completely false, Craig.

No Bert it is true. As a nation we spend hundreds of billions on entertainment.

Most homes have no say in what content they are buying, and know full well
that they are paying for content they don't want. That's why such a huge
percentage has already shaved or outright cut the cord. Because they see
options they didn't have previously.

You are correct that people are upset about paying for content they don't
watch, now that all these unwatched channels add us to real money. To make
matters worse, SVOD is vastly superior to the ad supported rerun channels that
make up the lion's share of unwatched MVPD networks.

But the percentage of cord cutters is not huge, and the MVPDs are starting to
become more competitive, which is helping to slow or eliminate the cord
cutting. And then there is the reality that there are no realistic options for
most of the content in the MVPD bundles.

What you fail to understand, Craig, is "momentum." People are slow to react.
But they are reacting, more every year. Like I said, once upon a time, if you
wanted a movie channel, you had to subscribe to cable, pay for a bunch of
nonsense you don't want, to get HBO. Now you have several options, which
don't even require a cable subscription. People aren't that dense.
Eventually, they react.

This is bull. HBO was a satellite service before it became a cable service. It
has always been sold as a premium tier, and most systems made it available to
basic/lifeline subscribers. The big change with HBO and other premium movie
services is that Internet technology has made it possible to offer their
current content on demand, as well as on demand access to their older library
content.

These on demand services are available no matter how you subscribe to HBO, with
HBO Go for MVPD subscribers.

But the monopoly is allowed by the politicians and regulators,

The monopoly was INEVITABLE, Craig.

No Bert. monopolies are not inevitable. They are illegal.

This monopoly was inevitable because the content congloms are critical for the
politicians to grow government and stay in power. Sadly were are seeing less
and less competition in many industries as they learn how to play the crony
capitalism game in your backyard.

At last! That's why retrans consent fees happened, that's why Aereo went out
of business.

Yup. The congloms got the politicians to protect their kingdom and provide the
tools to help it grow.

That's why there are copyright laws, that's why plagiarism is a crime. It has
nothing to do with "politicians." It's the way it's always been and has to
be. You can't get rich from stealing someone else's work, without his
consent, even if that person was giving it away.

You cannot steal something that is offered in the free and clear Bert. CATV
HELPED broadcasters grow and become more profitable. The government backed a
blanket copyright deal to allow the CATV systems to legally retransmit
broadcast content.

The broadcasters were not hurt by MVPD carriage, they were hurt by MVPD
competition. So they used their political muscle to claim they were being
harmed and then used that power to take over the competition.

Regards
Craig

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References:
- [opendtv] Re: Early UHF in DC and Baltimore
  - From: Manfredi, Albert E

[opendtv] Re: Early UHF in DC and Baltimore

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