Does Senator McCain‘s new Consumers Having Options in Cable Entertainment CHOICE A La Carte bill give hometown AT&T another opportunity to create a distinct competitive advantage over their cable and satellite competition?
While the entrenched cable and satellite TV providers continue to fight ala carte programming almost out what appears to be a reflex now, AT&T is starting with a clean slate in this market and thus an opportunity to create some new rules. By embracing this bill and offering a la carte as part of U-Verse AT&T could create at least two key advantages.
One, from a marketing standpoint, a la carte creates the opportunity to position U-verse in the consumer mind with a clear and distinct difference over the cable company programming packages. Build the U-verse brand by telling the consumer they really can order only the channels they want and save a bundle on their cable tv bill.
Remember, it is supposed to be Your world. Delivered. Right? Not The best bundle of programming AT&T could negotiate. Delivered.. Consumers should have the power to shape their television world the way they want it. The unique competitive advantage and clear choice between an a la carte U-verse service and existing satellite and cable choices might just create a viral force in the marketplace that would be hard for the cable companies to beat back.
Right now the packages available from cable, satellite and now U-verse might be perceived as really not all that different in the eyes of the average consumers. Though it is nice, does the average consumer really care all that much whether channels change a half second faster or that the GUI is a little slicker? Some do, for sure. But when a company offers real savings and total choice, a large block of consumers will choose those options first every time.
Another real advantage to the provider that adopts a la carte is that it may help solve looming capacity issues. If the provider doesn’t need to allocate bandwidth to deliver a bundle of channels, most of which the consumer doesn’t want, wouldn’t that then free up some capacity that would allow the provider to make available a sizeable number of new programming options that the consumer can choose from?
The NCTA responds that a la carte means Fewer Choices, Less Diversity, Higher Prices. Some would argue that the exact opposite is actually true. The consumer would receive more choice because a la carte gives the provider more capacity to make more programming options available and that in effect also leads to more diversity. The higher price argument is true if you look at the per channel charge to the consumer. So if I get charged $3 a month for ESPN as part of a bundle, maybe I end up paying $4 for ESPN a la carte. Volume discounts are a normal part of doing business and a trade off consumers would likely understand and embrace. If you buy five channels your cost per channel will be more than if you buy 500 channels. True. But your total cable bill may be much lower. And if a la carte really was going to make cable bills larger would the cable companies be fighting it so aggressively?
The real test would be to give the consumer the option to choose both. Huge channel packages with 1000 channels will make sense for some consumers and they can buy them. But they don’t make sense for many other consumers, and currently this group has no option.
Perhaps some irony is on the horizon as it appears that broadband distribution and IPTV may settle this a la carte debate in the marketplace. If those whose mission it is to deliver these services to the consumer got out in front and embraced consumer choice wouldn’t they be serving their consumers and their shareholders better in the long term?
related post: An open letter to Ed Whitacre – November 2005.