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TV Executives Warn FCC Against Mandating Cable a la Carte

Apr 15, 2008  •  Post A Comment

Executives of ESPN, Disney/ABC, MTV Networks, NBC Universal, Turner Broadcasting and Fox are taking the unusual step of publicly warning Federal Communications Commission Chairman Kevin J. Martin about any attempt to force a la carte programming distribution on cable providers, calling it “troubling” and “devastating to consumers.”
“If your plan is ever adopted, consumers will be outraged,” the executives said in an FCC filing today.
The executives were reacting to reports that Mr. Martin was considering regulations that would allow cable providers to remove from basic packages any channel demanding major price hikes in negotiations and offer it separately to subscribers.
Mr. Martin has expressed concerns about cable price hikes and suggested that cable viewers would be better off if they could pay only for the channels they watch.
Cable networks and the cable industry have argued that packaging channels to consumers keeps costs down while ensuring that consumers have an array of programming choices.
FCC officials saw the filing late Tuesday and didn’t have any immediate comment.
Today’s filing was signed by George Bodenheimer, co-chairman of Disney Media Networks and president of ESPN and ABC Sports; Judy McGrath, chairman-CEO of MTV Networks; Jeff Gaspin, president-chief operating officer of Universal Television Group; Anne Sweeney, co-chairman of Disney Media Networks and president of the Disney-ABC Television Group; Phil Kent, chairman-CEO of Turner Broadcasting System; and Tony Vinciquerra, president-CEO of Fox Networks Group.
They questioned the legality of the FCC mandating a la carte and strongly warned that the net impact of making channels a la carte would be to raise the cost of each channel while giving consumers fewer choices.
“The perverse result of your proposal is the most successful and most watched programs and networks—typically those that invest the most in quality programming—would be penalized for their popularity to the detriment of consumers,” the executives said. “Only the rare consumer who decides to take a handful of a la carte channels would end up paying less than they pay today … and even this consumer may not be better off as programming quality and choice suffer.”
“Consumers would be worse off because they would have fewer programming options under your proposal,” the letter continued. “Many new and diverse programming services, particularly those aimed at underserved and minority audiences, would not have been launched nor would they survive in a mandated wholesale or a la carte environment.”

112 Comments

  1. How shocking that the execs of the most expensive channels on basic cable today are the ones who don’t want to see ala carte happen.
    I think most cable subscribers would be shocked to see as a line item just how much of their monthly bill is going to ESPN. Turner is almost as bad with the confiscatory rates they have a history of charging for TNT.
    The bottom line is the execs are right – consumers will be outraged when they find out ESPN is responsible for around 1/4 the price of their entire basic cable tier and the price increases they demand each year because of the price increases passed along by the professional sports leagues.

  2. You go, Bill! Absolutely right. Cable customers are subsidizing the outrageous rates for a few sports-heavy networks. It would be nice to be able to opt out of a network like ESPN, which I have NEVER watched. ESPN needn’t worry, though, because sports programming still is the perfect anodyne for an ignorant society and most folks will lap it up instead of taking a look around and seeing what a mess their country is in, thanks in great part to the efforts of those big media companies.
    And really — if those folks are against something, you’ve got to know they’re ONLY worried about their corporate pocketbooks. The notion of “quality” is bit ridiculous to discuss when talking about what’s on their networks.

  3. Actually Bill and MS its the other way around. The high rates for ESPN et al. subsidize the smaller networks because Cable Operators are able to charge higher rates for the popular networks. If you were to force ESPN and the other most popular networks off the basic tier then the remaining channels on the basic tier would loose a valuable source of subsidization revenue.

  4. I would to not have pay for useless channels, such as Mtv, MSNBC, and WGN.

  5. ESPN might be subsidizing other smaller networks but how many channels does an average person watches anyway. I have 150+ from Time Warner cable and I can tell you I’ve definitely not even sampled all of them. Most of these small channels have a few hours of programming that they rerun ad nauseum. Let’s get rid of all these useless networks, please!

  6. We just moved back to the US from Hong Kong, where we had a la carte cable. It was fantastic – we paid for what we wanted, and didn’t pay for what we didn’t want. What a simple concept…

  7. As a marketer one of the primary complaints I hear when proposing a cable buy is that there is nothing worth watching on TV so why should I be there? I know my job is to disprove that, however I strongly believe that the popularity of a la cart will be stunning! Finally TV may have a place again in the family when the parents can control the options and not worry about allowing their children to watch TV without supervision.

  8. Just one more reason why wireline cable is doomed to failure.
    Both AT&T and Verizon plan to test-market a la carte with future rollouts of U-Verse and Fios.
    In this case, Chairman Martin would be wise to let the market decide.

  9. MS… you are full of B.S. What about your precious reality TV programming? Moron.

  10. It’s difficult to see how ala carte will work in environment that has over 100 channels. Some good quality but niche channels will not survive. But I agree that sports pricing is going thru the roof. Maybe that’s the genre that has to be broken off and sold on its own.

  11. I just downgraded my cable, and dumped HBO, Showtime, Cinemax, and Stars. No more Sopranos or Curb Your Enthusiasm, and Netflix is a better choice than the lame movies those services were offering. I was told by the Comcast rep that if I wanted to upgrade…literally for an only an hours or so (let’s say to watch Big Love when it returns) that I could do that, and the charge would be pro-rated. So I am wondering what the minimum time increment that they work off of is…like is it a day?
    I have Comcast NW Suburban Chicago, I wonder what having HBO for an hour a week or whatever, would run? Has done tried this?
    Comcast does not offer the SciFi channel and BBC America as part of their advanced basic or whatever they call it either, so I have to sign on for a lot of stations that I never watch in order to get those.

  12. Excuse my ebonics…I typed my previous message really fast.

  13. One must wonder what “ala carte” means. Does it mean paying for commercial sevices, which already should be free? Or does it mean locals and all CATV basic networks? I’m assuming its all of the CATV nets, to make this argument.
    I’m not impressed so much with the paying for TV, period! The reason, I have locals that aren’t carried by my “local” CATV carrier. Yes the home office is 5 Miles SW of my current location. Funny How I get ALL the networks on rabbit ears, but CATV refuses to pay for the signal deal. This does not include GLOBAL, CTV, A-CHANNEL or CBC and TVO over the border. They are just 60 miles north of me, easily gotten. Note: The only Windsor,ON channel is CBET-TV9 (CBC-Windsor). There are several others, but not on the cable.
    If that wasn’t enough, there’s not much I want to see on most of the cable networks, no matter what marketing, or ownership. Does it matter if HALMARK got the “Golden Girls”, if its so outdated that most will not understand it, when aired.
    To be honest, There’s only a few things I’d want to see, much less pay for on cable. With the changing of networks changing their programming focus, that strengthens my argument. MTV and VH1 are prime examples. No more “MUSIC” on either. They’ve become trash TV to be put on in the background. If I see that sort of thing happening, “ala carte” would allow me to drop these questionable channels that do not fit my viewing habits or choices.
    I do want ala carte, if the argument isn’t clear.
    Ala Carte will have drawbacks. I see the biggest set being cost and potential “packaging” for discounts. This would be like Caller ID (CID) being bundled with voicemail, etc. Still some services you may not use, for a lower cost.
    If I’m correct, the FCC works for us. I believe that ala carte is in the best interest of the public, which is how government IS SUPPOSED TO WORK, in the first place. Wasted money and wasted bandwidth from unwatched stations/channels is not.

  14. I’m fed up with having to pay for tons of channels that are NEVER watched. I’m fed up with being told by my carrier that I have NO CHOICE in picking the channels I do watch and subscribe only to those. I am not the least bit surprised to see the executives of various networks clamoring to stop the FCC from legislating “consumer choice” into their business. You can bet your last dollar that they have enough research already in hand to know millions of people will be opting out of such things as ESPN, Shopping Networks, Religious Networks, some News Networks, and other esoteric, low interest Networks. Let the sports fans of the world have their programming. Give them a seperate Sports Tier and load it up. But, don’t force feed those of us who have no interest with programming we don’t want. I urge FCC Chairman Martin to move forward with his plan for ala carte programming.

  15. I forgot to add my point of view on Satelite Networks…Dish and DirecTV. Why is it that the FCC allows these two to get away with charging seperately for Local Channels? Don’t the Cable Nets include the Local Channels for FREE? If so, why are there two sets of rules for charging?
    And let’s not forget about all those Music Channels that Dish and DirecTV force down our throats so they can claim another hundred channels. How stupid do they think the public is? Obviously, very stupid. But, then, we, the public have no options…no choice in the matter. It’s a forced “take it or leave it”! Okay, FCC and Congress — do you job and put a stop to this garbage!

  16. The problem with a la carte is that one person’s “favorite channel” is many others’ “channel I never watch.” Most people have about 10-15 channels that they watch regularly. Problem is, everybody’s 10-15 differs, many times within households.Is a 12-year-old’s set of channels the same as a 45 year-olds? No, but they live under the same roof and are on the same cable bill. And what happens when a channel changes its format more to your liking — how will you know about it? A la carte will fragment viewing, make it almost impossible for advertisers to buy nationally (and they do subsidize our cable bill), and result in higher per-viewer fees for each channel. The FCC has no idea about the impact of the proposal and a la carte promoters are selling consumers a bill of goods.

  17. Over the past few years, I have grown increasingly frustrated with the ever-rising pay-TV rates and the fact that I do not have the option to purchase only those channels I actually want to watch. Over the past ten years, the price of expanded basic cable service has more than doubled. During this time, pay-TV providers have made no effort to meet the needs of their customers by offering more flexible packages. Instead, they’ve used their monopoly status to force customers to purchase large and expensive packages of channels in order to receive the few channels that we actually want. In addition to inflating our bills, some of the channels forced upon us in the expanded basic package contain offensive material that we may not want in our homes.
    If the pay-TV providers honestly feel that a la carte programming would hurt consumers, then why not offer it IN ADDITION to packages. If the packages are REALLY the better deal, then consumers will choose them. But the point is that consumers deserve the CHOICE!
    It angers me that pay-TV providers continue to squeeze consumers, drive up costs, and control content. Consumers deserve more flexibility when it comes to the programming we pay for. Pay-TV providers have proven time and time again that they do not care about the needs of their customers, so I hope some legislation will be put in place to break-up this monopoly and provide consumers with choice.

  18. I resent being held hostage and FORCED to pay for crap I never watch. I care nothing about shopping, pro sports, religion etc. There are about fifteen channels I even care about. Just charge me per channel, with local free or as a cheap option and I will decide what I want.

  19. Reply to Jason: “what happens when a channel changes its format more to your liking?”
    If they want us to consider buying another channel, they can “free sample” us with it for a week.
    Reply to Jason: “A la carte will fragment viewing, make it almost impossible for advertisers to buy nationally”
    How lame! They find out how to place billboards, national TV ads and FM radio ads. Surely they are up to the task!

  20. At heart, from a business perspective, this is a matter of a consumer-forced change to an overall business model in a context of less than certainty that the replacement model would be as lucrative (and a current model that is operating very profitably, thank you very much). That there would be reticence is understandable.
    But a change will occur, TV execs, and FORTUNE’s Marc Gunther and others steadfast opinion’s not withstanding. The company that first reliably leads the effort will make out like gangbusters.
    (This said because an evenhanded look says there are large niche markets distributed across the major service providers that will consolidate with such a single a la carte provider, when this change occurs. Perhaps this realization is why there is discussion about possible ATT and Verizon offers.)
    To better understand one powerful driving force, consider the following somewhat (literally) perverse analogy.
    One finds onself working in a country that one must by ones car from among current model lines, with status quo being that the models all come with a minimal array of 40-200 accessories. That these accessories are pre-bundled and that their cost is passed on to you is a given. The business model for offering these has survived, because the accessories were so novel early in their offering, that the enticement of such “full featured” auto accessory packages easily carried the day at the onset. (Bear with; point looming.)
    After a period, however, purchasers began to realize that the vast array of factory-equipped accessories were not ones needed or wanted. Moreover, they realized that they were required, post hoc, to expend resources — especially time, which on this issue (esp. for the technologically challenged) is a significant demand — to remove the part of the accessory package that was unwanted.
    Adding to the aggravation was a realization that some accessories could (at least be viewed as) actually undermining the safety or other value-added aspects of the purchase, and, say, that unsafe elements could easily be added back surreptitiously — for instance, say, MPH limits by a rebellious teen — thus removing from the purchaser the sense of control and satisfaction that purchasing usually provides.
    Finally, then, consider, from whatever vantage point is your own, that among the dictated accessories in the vehicle’s passenger cabin — a place that you view as an integral part of your sometime “home” — that these dictated accessories include all of the following things, and more, things like:
    + a mounted KJ bible, and accompanying 24/7 soundtrack
    + a mounted poster of a victorious Joe Frazier, you being an Ali fan (substitute Auburn/Alabama or UNC/Duke, etc.), or
    + a statuette of a d__do, or of Ron Jeremy doing what he did best, or some like item.
    (And no, you cannot get the KJV in the set of 40, and leave out RonJ, thank you very much.)
    That is, consider that these fee-for-presence, unwanted accessories that demand your resources to remove, and that offer only limited assurance of permanent removal, consider that these speak, at least in part, to one or more of your most cherished personal commitments or convictions. (If none of these examples touch a deep nerve, use your imagination. You’ll get the picture.)
    The instinctive, and reasonable (even irresistible) question is, why does one have to pay the incremental cost of bringing in these things, especially when they are things that everyone, in part objects to, even strenuously, and perhaps fundamentally?
    In many ways this is a flawed analogy, but it captures the feeling and motive of a significant segment of the current market, and especially, components of the market that have show that they can be volatile in terms of their brand/SP loyalty.
    Moreover, it acknowledges the savvy of that market in realizing, all counter-arguments aside, that in submitting and purchasing such an accessory package, they are indeed underwriting continued production of objectionable components, and the “corrupt” business model as a whole.
    This is why this will prove to be a losing battle for business, and will, in the end yield to consumer desires, with someone making out like gangbusters. The impetus is there. The first/best to market will see this, and then there will be a rush.

  21. in the name of true capitalism and free enterprise, we consumers should have the right to pick and choose the channels that we wish to have and if the smaller one’s die, so be it. It’s the nature of things, let the consumer decide ……… not government or big CORUPT business ………as far as i’m concerned, i’m not going to give you idiots any more money than I have too. Cable sucks, DIsh NUTWORK sucks bigger and Direct TV wants too much money ……..
    MTV should be banned for being stupid and lame….
    Lifetime should dissapear….
    the LOGO or HOMO channel should stay in SF….
    and the MLB channel should really get a life……
    T.V. ………. it’s not just for EF Tards anymore!

  22. The underlying point here is consumer choice. While it is true that some people will only pick 5 or 10 channels, it might result in an increase in subscribers, who don’t have cable because they do not wish to pay for channels they will never watch. I think it has already been said, but the moment a company offers this, they will get a huge increase in the amount of people who use them.
    I would, no questions asked, pay a termination fee to break a cable contract to go to a company that let me pick the channels I want. As far as what I have now, there are many channels that get attention only when I am flipping through channels. Also, while the cost per channel might increase, I know that I would not have as many channels as I do now. Like I said, this could open up that service to other people as well.

  23. Just dump all Cox, Time-Warner cable, Directv and Dish Network subscriber services and watch TV over the internet. We are sick to death of watching 80% re-runs every year, not being able to watch what we want when we want, and having continuous service fee increases every year. Commercials suck and we don’t want to see them anymore. Advertisers should all go bankrupt.

  24. I want cable a la carte, I am tired of paying for channels that I will never watch.
    I cannot wait or that to pass. The cable company and network are scared, because they will not be able to feed us their garbage anymore.

  25. The people want ala carte.I watch the Science channel,DIY,military and so forth.I have to pay all those basic package first,before I can even get to the good channels.This is nothing but BS.give the consumer the right to pick what they want to watch,I have 100 channels I never watch.

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  27. So what’s going on with this, is it over, or are we getting a la cart or not getting it.
    The people want A la Cart, why would anyone say, they don’t want choices they would rather have the cable company choose for them. We have a right not to pay for what we aren’t watching.

  28. i would not take 90% of the channels i am forced to take now!! let ME decide what I want!!

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