This article discusses some of the reasons behind why cable prices are raising so rapidly. The author says that this trend is a result of cable companies working together to artificially raise prices. They do so by competing over issues like recording space instead of over price. Since cable companies are largely similar to the average American, people do not benefit from switching providers.
I think that there might be other reasons affecting this price increase as well. The supply for cable packages is strange. In some circles, like students or the tech savvy, cable has a direct substitute in internet service providers. A subscription for Netflix, Hulu, and Antenna costs 27$ per month total, as opposed to the cheapest cable providers $50 dollars a month. Therefore, since these products are substitutes, the demand curve for cable amongst the tech savvy is highly elastic. In fact, since the prices of internet TV providers are so much cheaper than cable, we can assume that anyone who views these products as substitutes will have already switched from cable to internet TV.
However, for many, internet TV is not a substitute. Perhaps they cannot figure out how to work netflix, or prefer to watch on a large screen TV. Maybe they just enjoy classic programming and like the ease of being able to turn on the TV and flip through the station. Whatever the reason, to them internet TV is not a substitute for cable. We can then assume that their demand for cable is relatively inelastic. Since they must buy from one of the cable companies, cable companies can increase their costs to make up for lost demand by internet users. To me, this is the more likely reason that cable companies have increased their costs so dramatically. It is interesting that the demand for cable can be both highly elastic and highly inelastic at the same time.
Most utilities come at a flat rate price, unlike cable. When purchasing internet access there may be a limit for bandwidth, but there aren’t sites which are limited by the internet provider. In the case of cable, they offer premium quality television to many unique audiences. The individual who wants to watch MLB may not be the same one who watches Game of Thrones religiously on HBO. Thus, because of the unique markets, I agree, the cable market is justified in upping the prices for services. While individuals can often find substitutes for basic cable through online services, the premium cable options are quite limited online.