Cable and Competition

Matt Yglesias and others are discussing the impact of cable bundling (which generally means charging people for channels they don't want) on cable prices. There are sounds reasons and basis, which Yglesisas discusses here, for government action to increase competition in the wired television market.

Regarding bundling and and its effects on pricing, Yglesias notes that subscribers only really want to watch a few channels yet pay their full bill anyway. This suggests that even unbundled sets of channels could still command high prices, especially in markets characterized by little competition, and that unbundling alone would not reduce prices.

But that analysis leaves out those for whom a $60 cable bill is not justified by a few channels and therefore don't subscribe at all (like me). Cheaper, unbundled channels could attract new customers and help retain those who are beginning to see Netflix, iTunes, etc. as attractive, less-expensive alternatives. In this way, competition from outside could eventually make lower-priced, unbundled channels a smart move for cable companies.