McCain Vows to Push a la Carte

Feb 13, 2006  •  Post A Comment

Sen. John McCain last week vowed to introduce a la carte legislation in the wake of a new Federal Communications Commission report that concludes it would be in the best interest of consumers to allow them to choose and pay for only the cable TV networks they want.

“The [FCC] report confirms what I have believed for years-if consumers are allowed to choose the channels their families view, then their monthly cable bill will be less,” Sen. McCain, R-Ariz., said in a statement. “Choice is far preferable to being forced to buy a host of channels they don’t even watch.”

Previous efforts by the maverick Republican to promote a la carte legislation failed in the face of a series of industry-backed studies-including an FCC report in 2004 during the tenure of then Chairman Michael Powell-that a la carte would hurt consumers, forcing them to pay more for fewer channels.

But the new FCC report, ordered by FCC Chairman Kevin Martin, who succeeded Mr. Powell, contradicts the Powell report’s findings.

“A careful analysis reveals that a la carte and increased tiering could offer consumers greater choice and the opportunity to lower their bills,” Mr. Martin said.

In the wake of the new FCC report, even Sen. Ted Stevens, R-Alaska, who recently voiced opposition to a la carte on grounds that it would hurt consumers, said last week that he is now open to reconsidering his position.

“If a la carte is not more expensive for consumers, I will support an effort to take such an approach, subject to discussions with providers on the downside of such a process,” said Sen. Stevens, the influential chairman of the Senate Commerce Committee.

Said Sen. McCain: “I will soon be introducing legislation that would entice all providers of television services to offer an a la carte option in addition to a package of channels in return for regulatory relief. I hope that the cable industry will appreciate the ability to choose, despite their failure to provide meaningful choices to their customers.”

The new FCC report, available on the agency’s Web site, FCC.gov, essentially argues that the Powell report was flawed because it relied on bad information supplied by the industry.

The 2004 study came down squarely on the cable TV industry’s side of the debate, arguing that a la carte would result in higher prices for consumers who subscribed to nine channels-and insisting that those who subscribed to 17, the number watched by the average cable consumer, would see their monthly bill rise by anywhere from 14 percent to 30 percent.

According to the new FCC study, the biggest blunder in the Powell report was the reliance on a National Cable & Telecommunications Association-sponsored study by Booz Allen Hamilton. The Booz Allen study, according to the new FCC report, included serious miscalculations and errors, ones the FCC said the firm acknowledged.

However, Booz Allen said in a statement it had acknowledged and corrected a mistake in one of its calculations. The company said its original findings remain the same.

“We continue to stand by our conclusions and underlying assumptions,” it said.

Indeed, the new FCC report said that, using Booz Allen’s own data-corrected for the errors that the agency said overstated the average price per cable channel by more than 50 percent-subscribers could get as many as 20 channels without an increase in their monthly bill.

“This is more than the 17 channels that the average television household watches,” the FCC said in its report.

The latest FCC report also said the agency’s 2004 report failed to mention that the Booz Allen study showed that-even with its miscalculations-if a la carte were implemented only on digital cable systems, subscribers could save 1.97 percent on their monthly bill.

In addition, using corrected Booz Allen data, most consumers subscribing to 11 channels would see their monthly fee drop by as much as 13 percent, the new report said.

The new report also asserted that a la carte could make it easier for new channels to launch on cable and that requiring consumers to purchase bundles of programming drives up cable prices, discouraging some from subscribing.

But according to the cable TV industry, which strongly opposes a la carte, it’s the new FCC report that has it wrong.

“Most studies conclude that a mandated a la carte regime would be more expensive for consumers and result in less diversity in programming,” NCTA President and CEO Kyle McSlarrow said in a statement. “It is disappointing that the updated [FCC] report relies on assumptions that are not in line with the reality of the marketplace.”

He added, “The marketplace in which cable, satellite, broadcasters and others vigorously compete for customers should decide video offerings, not mandates and price controls imposed by Washington, D.C. The notion that the government knows better how to improve on a competitive marketplace is not supported by the evidence.”

Despite those concerns, longtime proponents of a la carte were rejoicing.

“Consumers should praise FCC Chairman Kevin Martin and Sen. John McCain for striking at the heart of the cable industry’s flawed pricing scheme, which forces consumers to buy packages of television channels they don’t want and shouldn’t have to pay for,” said Jeannine Kenney, a senior policy analyst for Consumers Union.

Added L. Brent Bozell, president of the Parents Television Council: “We applaud the FCC and Chairman Martin for bringing the truth to an issue where only lies and deceit had gone before: Cable choice will help, not hurt, consumers.”

In a statement, Marc Lumpkin, a spokesman for satellite TV operator EchoStar Communications, said, “The new study issued by the FCC confirms what EchoStar has said all along: Consumers should drive programming selection, not large programmers mostly owned by broadcasters and cable operators. … We applaud the FCC’s Chairman Martin for focusing attention on this important issue.”

Geraldine Laybourne, chairman and CEO of Oxygen Media, said in a statement: “Arguments over economic assumptions still don’t address one of the biggest problems I have with a la carte. And that is TV viewers often don’t know what they want to watch until it’s there for them as an option. Who would have known to subscribe to Bravo-to watch ‘Queer Eye for the Straight Guy’-prior to it airing? Hits come from new channels all the time.

“Would consumers really want to switch networks every few weeks so they can watch the newest shows on cable? And how would shows become hits if they don’t have the viewers to watch them? The a la carte model would make it extremely difficult for any new network to launch successful new shows, and therefore extremely difficult for any new network-especially those appealing to underserved audiences-to make it.”