I have little doubt that if there was open competition for cable airwaves, companies offering a la carte programming would cream the standard offerings, because people would take lower prices in exchange for not getting 200 channels they have no interest in.

Cable TV may be a natural monopoly, in which case it's optimal to have a single firm given rights to an area by local government. That's fine-- they exist. The socially optimal arrangement in these cases is for those firms to be regulated by the government in such a way that they don't extract "monopoly rents" from customers. That means price controls, essentially.

Look, either a channel is economically viable on its own, or it's not. If it is, it'll do fine under an a la carte system. If it isn't, its existence essentially amounts to a cabal on the part of the channel operators and the cable companies to hose the average consumer. Cable adds the channel and raises prices. The consumers are screwed, because either they pay the raised prices, or they don't get cable at all-- there's no alternative provider (other than satellite for some users, and that's fraught with its own issues).

My opinion: cable companies are essentially an unnecessary middleman which should be eliminated. All they do is suck profits out of the system. Anyone who wants to should be able to buy a piece of the cable spectrum for an operating fee. From that point on, they can do whatever they want with it-- sell it to consumers, fund it through advertising, both, neither, whatever. Some part of the spectrum should be used for public service channels.

Unfortunately, the cable companies have tons of money and legislators in their pockets (hi, Arlen Spector!) and consumers have bubkus.