On Heels of FCC Study, McCain Vows to Introduce a la Carte Legislation

Feb 9, 2006  •  Post A Comment

Giving a la carte supporters reason to cheer, the Federal Communications Commission on Thursday released a long-anticipated report that concludes that many cable TV subscribers would benefit by being allowed to choose and pay for only the TV networks they want.

In addition, Sen. John McCain, R-Ariz., announced Thursday that he will introduce 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.”

“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,” he said. “Choice is far preferable to being forced to buy a host of channels they don’t even watch.”

Many in the cable TV industry strongly oppose a la carte, contending that it would result in higher programming prices and eliminate some networks currently carried on cable’s basic tiers.

In a 2004 study, the FCC, then chaired by Michael Powell, came down on cable’s side, arguing that a la carte would result in higher prices for consumers that subscribed to nine channels — and insisting that those who subscribe to 17, the number watched by the average cable consumer, would see their bills rise by 14 percent to 30 percent a month.

But the new FCC study takes issue with Mr. Powell’s study, saying the earlier research was based on a National Cable & Telecommunications Association-sponsored study by Booz Allen Hamilton that included serious miscalculations and errors that the FCC said the firm has acknowledged.

The new study, citing a lack of data on how much cable TV operators would force consumers to pay for networks offered a la carte, did not include estimates of how much consumers would save if allowed to choose their own networks using accurate data and assumptions. But it said subscribers could get as many as 20 channels without an increase in their monthly bills, using calculations based on Booz Allen data corrected for the errors that the agency said overstated the average price per cable channel by more than 50 percent.

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

The FCC report, available on the agency’s Web site, FCC.gov, also said the agency’s 2004 report failed to mention that the Booz Allen study — even with its miscalculations — showed that if a la carte were implemented only on digital cable systems, subscribers could save 1.97 percent on their monthly bills. In addition, using corrected Booz Allen data, most consumers subscribing to 11 channels would see their monthly bills drop by up to 13 percent, the new report said.

The report also argues 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 and could discourage some from subscribing.

In a statement, NCTA president and CEO Kyle McSlarrow said the new FCC report got 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,” Mr. McSlarrow said. “It is disappointing that the updated [FCC] report relies on assumptions that are not in line with the reality of the marketplace.

“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.”

Said Jeannine Kenney, a senior policy analyst for Consumers Union, “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 Sen. Ted Stevens, R-Alaska, chairman of the Senate Commerce Committee: “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.”