It's hard to imagine that there are too many Americans who are happy when they open their cable bill each month. That's because the average U.S. household now pays $64.41 per month, nearly triple the amount paid in 1995 when the Federal Communications Commission began tracking prices.
It's easy to blame that on Comcast (NASDAQ:CMCSA), Time Warner Cable (NYSE:TWC), Cablevision (NYSE:CVC), Verizon (NYSE:VZ), AT&T (NYSE:T) and the other major cable providers, but the U.S.government has done its part to drive prices higher. The cable companies benefit from higher prices and the FCC has propped up the system that keeps prices rising.
Neither the government nor the cable companies are on the side of consumers. This has led to a cozy system where pay TV providers have been able to dictate terms. Want the Disney suite of channels for your child? You can get them, but it requires you to pay for all sorts of stations you may not want. The same is true for various regional sports channels and every cable subscriber pays for ESPN -- generally the most expensive channel by far -- whether they want it or not.
How the cable companies make you pay more
Cable companies have the right to set their own prices except in the case of local markets where they have a monopoly. In those cases, the companies must work with local government to determine the price of basic cable. Of course, basic cable is usually very basic, consisting of little more than the local broadcast networks, some free community channels, and a handful of other stations few people want.
In most cases cable customers want more than the minimum and the cable companies, as well as satellite providers offer tiered groups of bundled channels. The first level above basic will likely contain a number of popular stations -- MTV, ESPN, and USA for example -- but may not have all the family, sports or specialty offerings you want. You may not care for MTV but want the various country music stations, but there is no opportunity to make changes. If those country channels are on a higher tier, you will have to pay more to get them and you won't be able to opt out of stations you don't want.
Cable companies could offer a la carte pricing, where customers only pay for the channels they want, but they have fought that vigorously, pretending they are doing it to benefit consumers.
"If you had to pay separately for just PBS, probably, sadly, not a majority of Americans would do that," Comcast CEO Brian Roberts told PBS back in 2013. "So there's many channels, whether it's Discovery Channel or C-SPAN or many, many others, that just aren't viable. You can't just buy the sports section of The New York Times. You take the whole paper."
How the government supports your higher cable bill
Congress has the ability to force cable companies to offer a la carte pricing, but efforts to do so continually fail. Even a 2013 bipartisan effort co-sponsored by unlikely partners Senators John McCain (R-AZ) and Richard Blumenthal (D-Conn.) went nowhere. Variety reported on Blumenthal's logic for signing onto the bill:
Consumers should not have to pay for television channels they don't want or watch. The current antiquated, antidemocratic system imposes all-or-nothing cable packages that give consumers no control over their cable bill, and prevent subscribers from voting with their feet when they are unhappy.
The government also gave cable companies a nice revenue boost when the FCC decided in 2013 to allow cable systems using purely digital systems to encrypt their signal. This forces customers to rent a cable box for every TV in their home on which they wish to watch pay TV. Since these boxes are generally rented from the cable provider, it's a clear case of the government passing a rule which benefits big business at the expense of consumers.
Who wins? Not you.
The reason your cable bill is so high is due to tiered pricing, which cable companies like and the government supports. Since many of the cable companies also own channels, forcing customers to pay for those networks, whether they want them or not, is a way to profit twice. If Congress or the FCC mandated a la carte pricing, then your cable bill would go down. Similarly, if one cable company or satellite pay TV service moved to an a la carte model, the current industry pricing model might collapse.
A la carte is likely something that's coming whether the cable companies or the government want it to. The two may continue the current dance which has made the cable companies so much money, but government is not going to be able to protect the pay TV industry from technology. Consumers are already using the various streaming services to create their own TV-like services and that is only going to increase going forward.
It's been a nice run, but for big cable, and the government that has inexplicably supported artificially high prices, the party is over.
Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends Walt Disney. The Motley Fool owns shares of Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.