FCC’s Latest Report Does a la Carte Flip

Dec 5, 2005  •  Post A Comment

Federal Communications Commission Chairman Kevin Martin dropped a bomb on the cable TV industry last week when he revealed that a soon-to-be-released agency report concludes a la carte cable TV is in the consumer’s best interests. The new report contradicts an FCC study released late last year, when Michael Powell was the agency’s chairman.

According to the Powell report, a la carte is not economically feasible and would result in rate increases of anywhere from 14 percent to 30 percent for the average cable subscriber. The Powell report has been widely cited by the cable TV industry as it fights legislative efforts that will force cable operators to allow subscribers to pick and pay for only the channels they want.

But Mr. Martin’s new agency study finds that the report was flawed, relying on “problematic assumptions” and “incorrect and incomplete analysis,” Mr. Martin said to industry representatives during an all-day Senate Commerce Committee forum on how to deal with continuing concerns about indecency .

The new agency report finds that a la carte could result in lower prices for consumers in many cases, according to Mr. Martin.

“It [a la carte] could end up being beneficial to consumers,” Mr. Martin told reporters.

Mr. Martin also said he believed escalating concerns about the edginess of the cable TV industry’s programming-which is currently exempt from FCC indecency prohibitions-could be eased if cable operators let consumers pick programming networks a la carte, or at least provided a tier of family-friendly programming.

As an alternative, the FCC’s broadcast indecency regulations could be extended to include cable’s expanded basic programming, Mr. Martin said.

“I continue to believe that something needs to be done to address this issue, and the industry’s lack of action is notable,” Mr. Martin said.

Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, told reporters that despite Mr. Martin’s claims, other industry studies-and one conducted by Congress’s General Accountability Office-show that a la carte proposals would drive up programming costs and ultimately force some basic cable networks out of business.

“You’re going to end up with people getting fewer channels [and] probably less compelling content, because programmers will have to shift some of the money into making up for lost advertising revenue,” Mr. McSlarrow said.

Despite Mr. McSlarrow’s criticisms about a la carte, some industry observers are concerned the model could become standard-especially if Comcast and Time Warner agree to it as a condition of the FCC approving their pending Adelphia Communications acquisition.

Cablevision Endorses a la Carte

The notion of a la carte cable appears to be gaining some support within the distribution community.

Cablevision Systems Corp. last week publicly endorsed Federal Communications Commission Chairman Kevin Martin’s suggestion that a la carte cable would be in the best interests of consumers.

“Like Chairman Martin, we do not believe in the long term that selling programming a la carte will be detrimental to either programmers or cable operators,” Cablevision Chairman Charles Dolan said in a statement released Thursday. “On the contrary, our experience indicates a la carte will result in a more affordable service for all, with more programming options.”

Mr. Dolan said the FCC chairman’s suggestion that consumers be allowed to pick and pay for only the cable TV networks they truly want is consistent with the best retailing traditions.

AT&T (formerly SBC Communications) said it would offer a la carte on its new broadband video services, if that’s what subscribers want and cable TV industry programmers permit the phone company giant to do so.

“If consumers want a la carte programming, we will be happy to offer it so long as we are able to obtain access to the programming in that manner,” AT&T spokesman Mike Balmoris said in a statement. “As we enter the video market, it is our goal to deliver more choices to our customers when they want it, in the way they want it.”

Cablevision is a longtime supporter of a la carte, and Mr. Dolan has testified to that effect in Congress. In his statement last week, he said he hopes Mr. Martin’s remarks-made during a Senate forum on indecency earlier this week-“encourage a move by the industry in this direction.”