Video subscription services are odd products, in a way. Because the actual product is an experience, and since the experience can include any number of specific channels, it is difficult to directly compare “products” by price, in the same way that one cannot easily compare mobile service experiences across smart phone and basic phone buyer bases, or plans with bigger or smaller buckets of usage. The price of the smart phone experience is higher, but the experience also arguably has much more value.
Something like that process applies to video entertainment services as well.
The average monthly price of expanded basic service (the combined price of basic service and the most subscribed cable programming service tier excluding taxes, fees and equipment charges) for all communities surveyed increased by 5.4 percent over the 12 months ending January 1, 2011, to $57.46, compared to an increase of 1.6 percent in the Consumer Price Index (CPI), the Federal Communications Commission reports.
The price of expanded basic service increased at a compound average annual growth rate of 6.1 percent during the period 1995-2011. The CPI increased at a compound average annual growth rate of 2.4 percent over the same period. However, the price per channel (price divided by number of channels) for subscribers purchasing expanded basic service decreased by 2.1 percent over the 12 months ending January 1, 2011, to 57 cents per channel. Over the 16 years from 1995-2011, the increase in price per channel was less than 1 percent per year (0.9 percent) on an annual basis
You might expect that prices would be lower in markets that were more competitive. The answer is both “yes” and “no.”
Over the 12 months ending January 1, 2011, the average price of expanded basic service increased by 5.2 percent, to $56.82, for those operators serving communities where the FCC says there is “no effective competition.”
In communities deemed by the FCC to have “effective competition,” the average price of expanded basic increased by 5.7 percent, to $58.47. So on that score, prices were higher where the FCC deemed there was effective competition.
The reason is likely that, where there is competition, contestants add more channels in an effor to differentiate themselves, and that drives the higher cost.
Over this period, price per channel declined by 0.4 percent in “non-communities,” to 58 cents per channel, and by 4.9 percent in “effective competition” communities, to 55 cents per channel (though no consumer can buy channels a la carte).
The “price per channel” is 6.2 percent lower in “effective competition” communities than in “non-competitive” communities, which reflects that operators in effective competition communities carry more channels on expanded basic service than in “non-competitive” communities.
“Overall, for expanded basic service, the effective competition price is higher by 2.9 percent compared to the noncompetitive group average,” the FCC says.
