While every customer service industry deserves intense scrutiny, many pundits have chosen cable as an easy target and use naive (and wrong) analyses to declare that consumers are somehow getting ripped off.

In a recent posting touting his new book, Gotcha Capitalism: How Hidden Fees Rip You Off Every Day and What You Can Do About It (accompanied of course by a web ad telling readers where they can buy the book), MSNBC Technology Correspondent Bob Sullivan jumps to a few erroneous conclusions that cry out for a response. While the juicy rhetoric in the column probably achieves Sullivan’s number one goal of selling more books, the juvenile analysis of why consumers are spending more for cable service today than a decade ago certainly fails Economics 101.

The simplest – and in fact true – explanation of why cable customers are spending more today is that they are subscribing to a video service that is dramatically different (and much better) than in 1998. Consider that in 1998, cable was an “analog” only service that offered 75 channels, period, end of story. Today, cable offers hundreds of channels in both analog and digital with high-definition, video on demand, digital video recorders and other interactive features that consumers love. And, besides a video package, millions of consumers now subscribe to cable’s “triple play” bundle which adds broadband Internet and digital phone service to their video package.

A great way to judge the value of a product is a simple “use vs. cost” analysis. That simple analysis for video service is something called Price Per Viewing Hour (PPVH) which measures how many hours a customer watches TV versus how much they pay for it. The good news for consumers is that cable’s PPVH decreased by 15.4% between 2001 and 2006…that is, the actual cost per hour of watching TV has dropped.

One more point — it’s ironic that Sullivan first complains about rising prices then later talks about the “addictive” power of cable. He claims this addictive power is somehow preventing consumers from exercising self control by subscribing to a different video provider. But 35 million consumers have broken through cable’s alleged mind trap because that is the number (steadily growing in fact) that now subscribe to one of the two national satellite video companies or the two telcos (Verizon and AT&T) that now are offering video service.

These facts may not make great headlines or sell many books, but consumers deserve to know the real story.

Over at The Progress & Freedom Foundation, they’ve undertaken a new project entitled “Media Metrics: The True State of The Modern Media Marketplace.”

The objective is to capture the state of America’s modern media marketplace, so that we can have a discussion based on evidence, assessing such factors as choice, diversity, competition, localism, and so on throughout the media landscape. In the link below, you can read the first four installments of the series.

Media Metrics #1: Introduction & Analytical Framework

Media Metrics #2: Household Access to Media Services & Technologies

Media Metrics #3: Ad Wars

Media Metrics #4: Changing Fortunes

A pretty hilarious moment (for me anyway) occurred on today’s edition of the syndicated television program Martha. During the last segment of today’s show, host Martha Stewart had her guest Sheraton Kalouria, the president of broadcasting for Martha Stewart Living Omnimedia, demonstrate how to use Video on Demand.

(If you’re somehow unfamiliar with VOD, read more here.)

The hook appears to be that Martha Stewart On Demand is now available through Comcast and Cox. In the segment (summarized here), Kalouria took remote in hand and showed Martha how to navigate through the menus and find the content you want, available for free.

The Martha Stewart On-Demand channel features a wonderful selection of things the company is best known for: crafts, weddings, pets, and food. Under each section is a selection of content from our programs, including “The Martha Stewart Show,” “Martha Stewart Living,” “Petkeeping with Marc Morrone,” and “Everyday Food.”

This is part of a growing trend of cable operators beefing up their VOD libraries to give more content to their customers. It was pretty funny to see a big media mogul like Martha scrolling through on-screen menus, but it was probably a great learning experience for her viewers to be exposed to the VOD platform.

Right on the front page of NCTA’s website, down in the lower right corner, we run a little feature called “Statistic of the Week.” Since cable prices are always a hot topic, and since I’ve made some reference to the notions of price and value, I thought I’d highlight what we’ve run recently.

This week it was:

Cable’s PPVH decreased by 3.3% on a nominal basis between 2001 and 2006 and 15.4% on a real, or inflation -adjusted basis

And this was footnoted as follows:

[PPVH = Price Per Viewing Hour = the price of a cable subscription divided by the number of hours per month spent viewing basic cable networks]

Source: Average basic cable rates from SNL Kagan divided by average basic cable network viewing time from CAB

Fine. What the heck does this mean? It means that how much you watch cable television ought to be factored into price and value. Any discussion of cable prices ought to be put in context. NCTA doesn’t think that the nominal price is the most accurate measurement. It’s not like a loaf of bread or a carton of milk; over time the service that cable offers to customers changes and the way people use that service changes.

The FCC is quick to point out that the price per minute (which is a quantity-adjusted metric much like PPVH, the price paid divided by the amount consumed) of wireless service has been declining, yet the Commission fails to acknowledge or discuss PPVH. Consumers are paying more for wireless service and they are paying more for cable service, but they are also consuming (talking/viewing) more of both services too. They must be finding value and quality in each of these services.

As I mentioned in my first post, I’ve been a cable customer for most of my life. I pay more today than my parents paid back in the early Seventies. But I get a lot more channels, the programming is more diverse and is of a higher quality and I now spend more of my time tuned to more cable networks than I used to.

We sent a letter to the FCC a year ago. In it, NCTA’s President & CEO Kyle McSlarrow noted that today’s marketplace is quite dynamic and there are better ways to measure price:

Although it’s short-sighted to focus on video pricing alone, there are more obvious ways to measure prices that actually stand up to scrutiny. It is useful for consumers and policymakers to know whether price increases are or are not accompanied by corresponding increases in the quantity and quality of the service or goods being sold. That’s why it is important to analyze prices not only on an inflation-adjusted basis but also on a quality-adjusted basis.

One way is to simply measure the price per channel as the FCC has done for some time. And the data clearly show that the real price per channel over ten years has gone down, not up.

He also talks about PPVH and you can read the whole thing for yourself. I’d also recommend looking at this study by Professor Steven S. Wildman of Michigan State University. He argued that the “real (inflation-adjusted) price of cable service divided by the number of hours spent watching basic cable programming” was a good way of measuring prices. If you pay 10 bucks for service and watch 10 hours, then you paid a buck an hour. If you pay 20 bucks and watch 60 hours, then you paid 33 cents an hour.

On Tuesday, NCTA filed a Petition for Stay pending its appeal of an order of the FCC entitled Exclusive Service Contracts for Provision of Video Services in Multiple Dwelling Units and Other Real Estate Developments.

As described in the Multichannel News article by Ted Hearn:

NCTA sought a stay in the U.S. Court of Appeals for the D.C. Circuit on one key issue: the FCC’s decision to apply the ban to existing contracts, not just to future deals, between cable operators and the owners of multiple dwelling units (MDUs.).

You can find NCTA’s filing on our website. There’s another article on this action at Light Reading. And you can read the Oct. 29 article in the NY Times that kicked this whole thing off: F.C.C. Set to End Sole Cable Deals for Apartments.

UPDATE: Apartment owners appeal FCC decision banning exclusive cable contracts.

Now the National Multi Housing Council and National Apartment Association who represent the owners of many of these buildings are challenging the ruling in the U.S. District Court of Appeals’ District of Columbia division. The complaint alleges that the ruling exceeds FCC authority and is “arbitrary and capricious, an abuse of discretion, unsupported by substantial evidence.”

And a Dow Jones story on NCTA’s filing as well.

Phillip Swann of TVPredictions.com apparently was out at SCTE’s 2008 Emerging Technologies Conference, where he made some observations on the competitive battle between DBS and cable (You can read the release here).

In 2008, satellite networks will focus on their strength—their number of high-definition video channels—since satellite lacks the Triple Play, said Swann. This emphasis poses a “great threat to cable,” he said, partly in that it may entice cable into a battle over determining which of the two is more prolific at delivering video services. Meanwhile, Swann said, if that should happen, it would enable the telcos to be better perceived in the market as the Triple Play provider of choice in 2008. By the same token, he said, cable must avoid overemphasizing its Triple Play capabilities in certain markets since that would mean video subscribers would be more easily swayed by the video-focused satellite providers, such as DirecTV and Dish Network.

Swann predicts that the insurgents in this war for customers—Apple, Netflix, TiVo, and Microsoft, to name a few—will roll out “a slew of new TV-based products and services all designed to siphon off subscribers and revenue from traditional TV providers.” Swann cautions that cable must “be very careful’’ to refrain from trying to copy them and from being “overwhelmed by the hype over the next big thing.” He added, “When Apple does something, it is believed that all must follow, but think for yourselves. Look at what has been successful.”

There are any number of issues that come up all the time in the cable business. And one of them is the pay-per-channel scheme known as “a la carte.” Sure, it sounds attractive. But when people describe what they think they will get under a mandatory a la carte plan, it doesn’t match reality.

It came up last week when NCTA’s Kyle McSlarrow was on a panel; it comes up all the time. Steve Jobs just gave his yearly Sermon on the Mount (a.k.a, his Macworld keynote) and he announced movie rentals on iTunes and an overhaul of Apple TV. This led to the Bad Luck City blog’s headline: Apple TV and iTunes video rental: Bye Bye Netflix and Cable.

What this means is that I may be able to cancel my Netflix account and rely on Apple for my movies on demand. Why send bits of data on a envelope through snail-mail when I can do it over my Internet connection?

As you know, I ditched cable for OTA television long ago, but now everyone else can do the same, at least until the cable industry offers programming a la carte.

Of course, Netflix already offers online movie viewing and they just lifted time restrictions, so that their customers can watch all they want. And cable customers get a lot more viewing options (especially if you’ve got digital cable with VOD) than someone getting DTV over-the-air.

Here’s another example in a blog post about the satellite radio business:

Sirius’ CEO Mel Karmazin has promised the FCC to allow a la carte programming for a cheaper price if the merger goes through. This way customers can pick and choose what they want to listen to. Chairman Martin of the FCC has tried to get the cable companies to allow a la carte programming, but to no avail, so he may see the Satrad merger as a precedent for a la carte options.

I’m going to keep referring people to this great column by the NY Times‘ Joe Nocera about why a la carte means fewer choices and higher prices. Maybe the message will get through.

UPDATE: And here’s another one. Diane Keaton drops an F-Bomb on Good Morning America and a Wednesday evening panel grapples with the effects. Tim Winter, President of the Parents Television Council, and Shawn Ryan, creator of FX’s The Shield, got into a tiff:

The evening’s hottest moment flared between Winter and Ryan over a PTC-supported proposal to offer consumers a la carte cable choices. Instead of having to buy multiple channels bundled in one package, the PTC supports legislation that would allow consumers to cherry-pick and pay for only the channels they want to watch.

“Why should I have to pay for FX when all I want is the Disney Channel?” argued Winter.

But Ryan, whose award-winning, gritty cop drama “The Shield” broke new ground for language and violence on basic cable, said that proposal would stifle creativity.

“I’d prefer you be honest about this,” Ryan said to Winter, whose nonprofit group originally referred to “The Shield” as “filthy trash” when it debuted. The a-la-carte proposal is a “backdoor way to censor shows and networks,” Ryan added.

On the one hand, you have mandatory a la carte leading to less diversity in programming, which could lead to fewer family-friendly viewing options. And on the other hand, cable has a better solution for content that you may be concerned about: parental controls. Everyone has different opinions about what they might block and cable’s controls let you decide. Check out our Control Your TV website or this report from PFF’s Adam Thierer.

There are a few interesting nuggets to mull over from last week’s show. It really did feel like the first time that cable played a major role at CES. Heck, we’re not the only ones in that position; just as Comcast’s Brian Roberts was the first cable executive to address CES, General Motors Chairman and CEO Rick Wagoner was the first auto exec to do so. It’s great that we’re in the game, but it begs the question of what we do next.

Will Richmond had a post about how content players and consumer electronics companies will deal with their intertwined future:

…both industries recognize that we are moving into what I would call the “experience era” for video. That’s to say, success with consumers is going to rest more on these industries’ ability to deliver superior experiences which integrate content and technology in new and compelling ways. Rather than oohing and ahhing about their new TV’s picture quality or how hilarious a certain episode was, going forward consumers will increasingly cite “how cool” something is.

“How cool” are code words for “how compelling is the experience”. The new currency of video hipness will require that when I invite friends to my house and want to show off, I need to have more than just a honking-big screen or a digital collection of old programs - those will be commonplace. Instead, the experiences are what will matter. Things like seamlessly accessing broadband content on my TV, interacting with it — along with other viewers — from my couch, and moving it around my house for playback anywhere, in a snap. Delivering these types of experiences (and more) is the new competitive bar that content and technology firms should be aiming for.

Cable is currently offering choice, value and convenience, by which I mean lots of viewing options, hi-speed data access, hi-def pictures, time-shifting options, attractive bundling options, and so on. I guess for some people what once seemed extraordinary can become commonplace.  But there is even more in the works. While I won’t go into detail here, cable does have some “cool” new things coming up that should prove to be pretty compelling.

Here are just a couple of headlines from around the net to get you through the day.

Oprah returns to cable (as an owner, that is) under a new deal inked with Discovery. The Discovery Health Channel will be rebranded as the Oprah Winfrey Network and carry “lifestyles-targeted programming.” Said David Zaslav, President and CEO of Discovery Communications, “There is no stronger voice than Oprah Winfrey in engaging, motivating and connecting people to live healthier lives. Oprah has inspired me personally, and through this new venture, Oprah’s talent and drive will have a dedicated multimedia platform to empower, engage and connect with people on-air and on-line”. Oprah previously held an interest in Oxygen before the sale to NBC. Look for the new net in 2009.

An appeals court has upheld the dismissal of a suit brought by EchoStar and DirecTV to overturn a tax levied in North Carolina.  The suit argued that gross receipts (paid by both cable and satellite providers in NC) were unconstitutional and unfair to satellite providers.  The court ruled that federal courts cannot enjoin states from imposing such taxes.

If you’re using that cable broadband connection to stream video, it’s a big day for you.  First, Netflix has lifted the time constraints on its video streaming service freeing customers to watch without limits.  This move comes on the same day that MacWorld saw Apple’s Steve Jobs announce video rentals through iTunes.  Under Apple’s plan, renters would pay $3.99 for recent releases, have 30 days in which to start watching and have to complete the program within 24 hours.

Speaking of MacWorld, if you’re looking to upgrade the old computer, Apple has a simple message - thin is in.  The MacBook Air weighs in at 3 pounds and is thin enough to fit in a manila envelope.  The new machine is just a hair over 3/4 of an inch at its thickest spot, and comes standard with Bluetooth and 802.11n wireless connectivity, a built in web cam, USB and a video port that supports DVI, VGA, and S-Video.  It sports 2GB of RAM and either an 80GB drive or a 64GB Solid State Drive with no moving parts. The keyboard is full size and backlit.  The MacBook Air has an external CD/DVD drive (which never proved really popular when they were in vogue with laptops 7 or 8 years ago, but wireless is more prevalent now).  The touchpad also feature iPhone like controls that let you zoom, rotate and navigate by gesture.

Finally, a hat tip to Broadcasting & Cable for the Simpsons parody of American Idol embedded below.

The performance by Flight of the Conchords at CES had not been available at Comcast’s CES website. They’ve rectified that and you can now catch Jemaine and Bret in action. Skip to about 12:10 left in the clip.