Groups to cable: Go a la carte

Dec 16, 2002  •  Post A Comment

Watchdog group representatives last week said they’re planning to lobby to force cable operators to bust up their basic tiers and let subscribers put together their own a la carte programming packages, paying only for services they really want.
“It’s a safety net for consumers,” said Jeff Chester, executive director of the Center for Digital Democracy.
“Consumers often tell us they would rather pick their own channels,” added David Butler, a spokesman for Consumers Union. “That’s an issue we intend to press very hard in the coming year.”
Under standard operating procedure, cable operators sell most of the programming they offer to consumers in take-it-or-leave-it packages.
The cable industry attributes the creation of dozens of new networks to its long-standing policy of tiering-the very backbone of the business.
But industry critics say tiering forces subscribers to subsidize programming they don’t want, contributing to the cable-rate increases they see as escalating wildly. A shift to a la carte, according to the watchdog groups, gives consumers greater control over what they pay for cable service.
“The cable industry is very vulnerable because they’re socking it to consumers once again,” Mr. Chester said.
Sen. John McCain, R-Ariz., has also expressed concern about increasing cable rates-and has made clear his interest in considering a la carte as a solution. The endorsement of the watchdog groups adds important support if the lawmaker opts to pursue a la carte when he steps in as chairman of the Senate Commerce Committee in January.
“I’m not sure an 80-year-old woman who subscribes to cable should have to pay for ESPN,” the senator said in an interview with Electronic Media last spring.
Cable TV bills are on the radar screens of watchdog groups because cable operators have announced annual rate hikes recently, with some handing down increases as high as 10 percent.
That’s on top of the industry’s 45 percent increase in rates over the past six years-nearly three times the rate of inflation.
“Unfortunately, this has become a holiday tradition,” Mr. Butler said. “We’re encouraging Sen. McCain to hold a formal hearing on cable price increases as soon as possible.”
Cable operators blame the price increases on the costs of programming and system upgrades.
But some say cable’s argument doesn’t ring entirely true, because revenues from local ad sales and such new services as broadband Internet access have been increasing at the same time. “We believe the heads of the major cable companies should be asked to appear before the committee to explain why cable rates continue to go up so dramatically,” Mr. Butler said.
In addition, though cable operators say they’re already being disciplined in the marketplace by competition from direct broadcast satellite services, watchdog group representatives say DBS has yet to develop into a true competitive alternative because it lacks the capacity to offer local broadcast TV channels in many areas.
The publicity about rate increases is being credited for widening the rift between programmers and cable operators, particularly because some operators have been blaming programmers publicly.
“I would love to have a year where I could say to my customers, `No rate increases this year,’ because my friends in the programming community said we’re going to have an amnesty campaign,” said Rocco Commisso, chairman and CEO of cable multiple system owner Mediacom, at the industry’s BroadbandPlus conference in Anaheim, Calif., earlier this month.
But at an investor’s conference in New York last week, Tony Vinciquerra, Fox Networks Group president and CEO, said that his company and other programmers may seek to boost affiliate fees.
“We have some potential upside,” said Mr. Vinciquerra, in an interview with Electronic Media. “[F/X] is going to continue to grow on the advertising side, the distribution side and potentially on the affiliate fee side, depending on how the business evolves over the next few years.”
Despite the tension between the industry’s two camps, key sources doubt it will force programmers out of the operator-dominated National Cable & Telecommunications Association.
“There is a synergistic relationship between programmers and operators that will survive this difficulty,” said Steve Effros, a cable TV industry consultant.
The cable TV industry has been warning that a shift to a la carte would kill many of the more marginal cable networks and make it difficult, or even impossible, to launch new networks.
One alternative being floated by Mr. Effros would be to retain basic tiers but force out networks that demand excessive rate increases. Another option would be to put expensive sports programming on a separate tier. “At some point, we’re going to hit a wall and we’re going to have to do something,” Mr. Effros said.
While some cable industry representatives say a la carte may not be the best solution, there does appear to be growing recognition that the industry should crack down on rates.
“It’s a festering wound that has to be dealt with,” said Michael Willner, president of MSO Insight Communications, at the BroadbandPlus conference. “If we don’t do it soon, we’re going to have people who try to find some sort of a legislative or regulatory solution.”