Monday, April 20, 2009

Pricing the Cable TV Banquet

When McDonald's raises the price of hamburgers, it can usually point to increased costs for beef, buns, and ketchup. Cable TV companies are different: Though their rates have gone up (more than hamburgers have), their costs have mostly gone down. In Saul Hansel's New York Times piece on this topic, the metaphor du jour is food:

“When you go to lunch with a friend, do you split the bill in half if he gets the steak and you have a salad?” Landel C. Hobbs, the chief operating officer of Time Warner Cable, asked recently in a blog post…

Still, critics say the image of Internet providers as restaurants about to go broke serving an endless line of gluttons simply does not match the financial or technological realities of the industry.… Cable or telephone networks have little in common with a restaurant, the critics say, because there is no electronic equivalent of food to buy. If all Time Warner customers decided one day not to check their e-mail or download a single movie, the company’s costs would be no different than on a day when every customer was glued to the screen watching one YouTube video after another.

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