Study Pans a la Carte

Nov 22, 2004  •  Post A Comment

It was the cable TV industry’s turn to say “We told you so” last week.

A report to Congress by the Federal Communications Commission said forcing cable TV operators to shift to a la carte pricing-where consumers pay for only programming they select-would result in higher bills for most subscribers. That is exactly what the cable industry has been saying for months.

“The FCC report to Congress makes clear that government-mandated per-channel pricing would not offer any benefits to the vast majority of consumers and would in fact result in higher prices, fewer choices and less diversity in programming,” said Robert Sachs, president and CEO of the National Cable & Telecommunications Association, in a statement.

It isn’t just pricing that the cable industry has used as an argument against a la carte. The point has also been made that allowing consumers choose only a few favorite networks would impede the development of new services and ultimately lead to fewer varied choices in networks and programming.

“The evidence is now in from virtually all the experts that an a la carte mandate would have a devastating impact on diversity in programming,” said Johnathan Rodgers, president and CEO of TV One. “As a network catering to the tremendously underserved African American audience, we applaud the FCC and hope this puts to rest the ill-conceived notion that an a la carte law could in any way be beneficial.”

In its report, the FCC said the costs associated with shifting to a la carte-including the necessary technological upgrades and billing system changes-would be passed along to consumers, absent the introduction of new rate regulation. “Many of the harms suggested by opponents of a la carte or themed-tier services have merit, although not necessarily to the degree advocated by its most vocal critics,” the FCC said.

The report said that rather than a la carte, “Competition, not regulation, is the answer.” Watchdog group representatives have argued that a la carte would give many consumers the power to slash cable bills. Given the choice, few consumers would choose to subscribe to all the dozens of niche fringe networks that they’re currently forced to subsidize in cable’s packaged basic tiers, according to the argument.

Not surprisingly, watchdog group representatives were not thrilled by the FCC report. They said it fell short by failing to pay adequate heed to proposals that would make a la carte voluntary and limit it to digital cable subscribers. “The study was rigged against consumers in favor of large cable companies, giant broadcasters and other media behemoths,” said Gene Kimmelman, senior director for public policy and advocacy for Consumers Union.

The FCC said its economic analysis showed that the only consumers likely to see their cable bills reduced under a mandatory a la carte regime would be those subscribing to fewer than nine channels. Consumers who purchase at least nine networks are apt to experience an increase, according to the FCC. Those who buy 17 channels-the number watched by the average cable consumer-would see their bills rise by 14 percent to 30 percent a month, the FCC said.

The FCC report, which was requested by Congress, also said a shift to a la carte would force cable networks that are now carried on tiers to put significantly more money into marketing. In addition, the FCC endorsed industry arguments that a la carte would undermine cable network advertising revenues, perhaps causing some networks to go out of business-a cause that religious networks were championing in force last week.

“Though well intentioned, the fact is that a la carte would threaten the very existence of religious broadcasting and the vital ministry conducted over the television airwaves,” said Jerry Falwell, president of the “Old Time Gospel Hour,” in a statement.