Matt and I have gone back and forth about this before, and I’d be lying if I said I felt completely confident in my response to the licenses-for-parks metaphor. But I do feel confident that he’s wrong about this:
[...] Once the cable company has built the infrastructure to deliver cable to your house and given you the box, it doesn’t cost them any more money to give you 100 channels rather than 10. To be sure, building infrastructure capable of delivering more channels costs more money. But once the infrastructure’s built, it can deliver what it can deliver and there are no incremental savings to achieve by not using all the capacity. I think it’s completely true that cable television has become a questionable value proposition—it’s extremely expensive and though the infrastructure to deliver hundreds of channels to the home is impressive, it’s not actually useful since nobody watches that many channels. What we actually need is faster broadband internet. But the infrastructure’s already built. Refusing to use it doesn’t reduce the suppliers’ costs and wouldn’t save customers any money.
Two things. First, the cable company buys its content from various aggregators and producers of video product. I’m sure that the terms of these purchases vary considerably, and to some degree must be tied to consumer demand for that content. But there is marginal cost to adding a new channel even if there isn’t marginal cost to distributing it. There’s necessarily cross-subsidization going on, which means some viewers are getting a raw deal. Probably most of them, I’d argue: given the lack of choice in the market, there are strong incentives for the cable company to add new channels in order to widen their customer base; they can simply add the new features to their existing customers’ tabs. iTunes, Amazon and Netflix can be understood to be competing with cable and satellite largely on the basis of offering a non-venti option to consumers (to borrow Matt’s analogy) and they’re having a lot of success with it because many people rightly intuit that they’re not consuming $100 worth of video product every month.
Second, nearly all cable systems are now or soon will be digital, which means they’re packet-switched, which means that, to varying degrees, broadband capacity and video capacity are fungible. The actual details are, I’m sure, quite convoluted and complex, and we’re not going to be able to hash them out here without help from someone who understands the relative merits of different versions of DOCSIS. But it’s safe to say that there is one copper conductor entering your house that handles both internet and TV, and that the portion allocated to each can be changed through configuration choices made by your cable vendor.