Claims that new video competitors will “redline”–i.e. avoid building out in selected inner-city or minority areas–remain a major stumbling block to video franchise reform in Congress. This was underscored yesterday in a letter by the Congressional Black Caucus sent to Reps. Barton and Dingell calling for anti-bia rules in any legislation. (As reported in Communications Daily (subscription)).
But do providers really have an incentive to redline? Certainly there are economic reasons not to build everywhere at once, but race or geography may have little to do with it. According to a just-released survey by Steve Pociask’s American Consumer Institute, African-Americans may be more profitable customers for video providers than others. At 78 percent, the total African-American subscription rate is one point above the national average. More striking, almost half of those subscribers are signed up for premium channels, compared to 31 percent overall. And a quarter of African-American subscribers have used pay per view features in the past six months, compared to only 19 percent of all cable subscribers.
Similarly, geography may not matter as much as many think. Urban subscribers subscribe to pay TV at almost the national average, and 38 percent of those urban subscribers sign up for premium channels, as opposed to only 17 percent of suburbanites. Rural subscribers, by the way, have the lowest subscription rate, although even they use more premium services that suburbanites.
Income, not surprisingly, does make a difference, with 64 percent of households making $25,000 or less subscribing to pay TV, as opposed to 77 percent of the population at large. But again, premium channels are a different story. Thirty percent of these lowest-income subscribers receive premium channels, almost exactly the national average.
This of course doesn’t mean providers will build out everywhere at once–economically, it makes sense to stagger the buildout. But the factors that determine that buildout may be more complex, and less predictable, than many assume.