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The East African : Jan 12th 2015
38 What ai≥line fees tell us about the cable indust≥y watch seems to be approaching. But subscribers may want to be careful what they wish for. Recently, the Dish Network T unveiled a new web streaming service with a handful of cable channels, including ESPN. It is the latest move toward a world in which people assemble a bundle of TV programming options piece by piece (a little Netflix here, HBO’s new streaming service there, Dish’s new Sling TV for some sports) rather than send a monthly check to their cable company for dozens upon dozens of channels packaged together. Eventually, cable companies may have little choice but to unbundle themselves, whether because of the competitive threat from various stand-alone streaming services or regulatory pressure. It would, at first glance, excite anyone who has ever groaned at the size of a cable bill and the number of chan- he day when people are no longer forced to pay for dozens of cable channels they never nels that hold zero interest. My colleague Josh Barro cov- ered the economics of cable unbundling last year. Several studies have shown that, contrary to many peoples’ intuition, the unbundling of cable service could actually lead to slightly higher prices for fewer channels. But there is another, more subjective dimension in which the rise of unbundled cable service may make us worse off. It is possible for a market to become more economically efficient while becoming less pleasant for consumers. For a prime example, head to your nearest airport. A generation ago, buying an airplane ticket meant buying not just a conveyance from one city to another, but an entire bundle of goods. Among them: A seat with enough room to sit comfortably; a meal, a glass of wine or a cocktail; the right to check your bag; the right to trade in your ticket for a ticket at a different time if your plans changed. As fliers have learnt all too well in the past decade, air flight COMMENTARY NEIL IRWIN “Eventually, cable companies may have little choice but to unbundle themselves.” has become unbundled. Want a bit of leg room? That will be a $50 upgrade for a seat in your airline’s “premium economy” cabin. Sandwiches are on sale for $9, a glass of wine for $7. Checking that bag costs $25, and there is a $200 change fee for your ticket, or buy a much more expensive one upfront. In effect, the airline industry has unbundled, so that you pay only for what you want. This is, traditional econom- ic theory would posit, a good thing. If you are short of money and will tolerate bare-bones flying experience — crummy seat, nothing to eat, locking your travel schedule far in advance — you are better off than ever before. The rise of airlines like Spirit (where you even must pay to put a bag in the overhead bin) and Ryanair in Europe (a fee just to check in at the airport instead The EastAfrican BUSINESS JANUARY 10-16,2015 of at home) suggests the de-bundling trend is not changing anytime soon, along with the push by major US carriers to subdivide their cabins into more tiers of service and comfort. Any of those changes to de- bundle air travel, in isolation, gives consumers greater control over their flying experience and greater power to pay only for the things they care about. People who are tall or affluent may pay for the extra four inches in economy seating, for example. People who once could not afford to visit family members across the country may now be able to find bare-bone tickets within reach. Spirit Airlines is not just the king of unbundling air travel; it is also the king of customer complaints. According to an analysis of complaints to the Department of Transportation by the US Public Interest Research Group Education Fund, Spirit had about nine complaints per 100,000 passengers, about three times as many as the airline with the next-most complaints. What does any of this have to do with the unbundling of cable? There are examples of people who would be better off in an era of cable unbundling, such as those who watch only a very small number of channels, none of them high-fee sports channels, with great regularity. They are the equivalent of the people who can afford to fly home to Grandma’s house now but could not in a pre-unbundling air transport system.
Jan 5th 2015
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