Tilted Forum Project Discussion Community - View Single Post - Why don't cable companies let us pick and choose channels?

Cynthetiq · 09-07-2004, 08:01 AM

two articles from July as this was recently being discussed by the FCC:

Quote:

FCC: Why No a La Carte Cable? By Michael Grebb
Story location: http://www.wired.com/news/technology...,64399,00.html

02:00 AM Jul. 30, 2004 PT

WASHINGTON -- Staffers at the Federal Communications Commission grilled cable industry reps Thursday about their opposition to letting viewers pick their channels individually, or "a la carte," expressing skepticism that it would destroy the economics of the industry.

Thursday's FCC symposium was part of the agency's research as it prepares to issue a report to Congress on the controversial a la carte model by Nov. 18. The House Commerce Committee requested the report earlier this year. Consumer advocacy groups have been asking Congress to look into why cable companies won't let subscribers pick the channels they want in their subscription packages instead of being forced into accepting dozens of channels they may never watch while still paying for them.

The FCC won't make recommendations to Congress, but its findings could determine whether Congress passes a bill to force cable companies to offer channel menus.

At Thursday's hearing, FCC staffers pounced when officials from consulting firm Booz Allen Hamilton presented a study (PDF), funded by the cable industry, that warned that a la carte would hurt cable networks.

"How rigorously have you tested the assumption that ad rates would go down?" asked FCC Media Bureau Chief Kenneth Ferree. "It seems like a somewhat irrational result."

Matthew Egol, a principal at Booz Allen Hamilton, told Ferree that "cable would be a much less attractive buy compared to other outlets."

Ben Golant, a senior attorney in the Media Bureau, pointed out that some start-up programmers and even some small cable operators seem to support a la carte pricing.

"I'm not too convinced that voluntary a la carte or themed tiers would be bad," he said. "How is it that your study does not reflect ... the feelings of very smart and astute business people?"

Indeed, Bennett Hooks, chief executive of Buford Media Group, a company that's buying tiny cable companies, said small rural cable systems would be willing to test a la carte if Congress would prevent programmers from requiring bundling of their content. Under these bundling arrangements, large media companies like Viacom and Walt Disney force cable operators to broadcast their less popular channels in exchange for the rights to broadcast their top properties, like MTV or ESPN.

"Let's give it a try," Hooks said. "Tying and bundling is killing this whole system. It's putting everything out of balance."

But Geraldine Laybourne, co-founder of the Oxygen cable channel, called a la carte "one of the worst ideas I have ever heard" that "would lead to more consolidation and fewer voices."

Michael Willner, chief executive of cable company Insight Communications, said he wouldn't have considered carrying Laybourne's network had she tried to launch in an a la carte world. "I would have thrown her out of my office," he said.

Consumer advocates, however, said other channels have been unable to get carriage.

"Ms. Laybourne is a drop of success in an ocean of utter failure," said Mark Cooper, director of research at the Consumer Federation of America.

The Booz Allen Hamilton study projected it would cost $17 billion to $34 billion to outfit cable homes with new digital boxes to enable an a la carte system. But Hooks said that's nonsense. Traps -- small electronic devices installed at customers' homes -- would suffice to enable a la carte pricing, he said. Traps are in wide use currently to block premium channels like HBO from basic cable subscribers.

"I heard comments that you need a box," he said. "That's ridiculous. You don't need a box. We can buy a trap."

But Willner said traps applied to so many channels would cause signal leakage and other problems.

"The more of these devices we put in line, they more capability there is for the system to break down," he said.

Consumer groups insist that simple digital routers similar to those already used for home networking would be a cheaper option.

"What we have here is a $500 solution to a $50 problem," Cooper said.

In its report, the FCC could highlight possible compromises such as test markets or "themed tiers" -- grouping of similar programming -- rather than full a la carte.

"The cable industry may have to select a compromise," said Margaret Smyth, a managing partner at consulting company Deloitte & Touche. "There would be some cost to it, but it would be a compromise solution in the political environment we're in right now."

Quote:

FCC to Sample TV a la Carte By Michael Grebb
Story location: http://www.wired.com/news/culture/0,1284,64382,00.html

02:00 AM Jul. 29, 2004 PT

WASHINGTON -- The ongoing debate over whether TV viewers in the United States should be able to pick their cable channels on an a la carte basis continues Thursday when the Federal Communications Commission holds a symposium on the controversial question.

Already, several lawmakers in Congress support new rules that would require cable operators to offer an a la carte option rather than force viewers to take all-or-nothing "tiers" of programming.

The cable industry, however, derides a la carte as a faulty concept that would destroy the economics of the industry and put some cable channels out of business.

Unlike many FCC events that involve broad questioning from commissioners, Thursday's symposium will feature staffers in the FCC Media Bureau. They are collecting data for an upcoming report on a la carte cable due to Congress on Nov. 18.

The report won't include any specific recommendations, but its tone -- especially on whether a la carte could result in huge price hikes -- could influence whether forces in Congress continue to pursue the issue.

The cable industry has been girding for the symposium.

"We certainly expect an opportunity to present our viewpoint on why a la carte would be harmful to consumers," said Brian Dietz, a spokesman at the National Cable & Telecommunications Association.

Cable industry reps are expected to argue that additional investments in equipment and other administrative costs would result in higher prices for all cable customers.

The FCC will also examine the situation in Canada, where several cable operators offer a la carte programming choices to TV viewers. Philip Lind, vice chairman of Canadian cable operator Rogers Communications, will testify.

A la carte backers have used the Canadian model as an argument for a la carte in the United States.

But Michael Hennessy, CEO of the Canadian Cable Television Association, has called a la carte a "none-too-successful aspect" of the Canadian system. Dietz noted the "irony" that digital TV penetration is actually lower in Canada than the United States.

Consumer groups will wage their own assault at the symposium.

In a presentation, the Consumer Federation of America will lay out a "mixed bundling" concept in which a la carte channel menus would only affect existing digital subscribers, to keep down equipment costs.

The group also argues the cable industry exaggerates costs to scare lawmakers.

"They have painted a doomsday scenario with no relation to reality," said Mark Cooper, the CFA's director of research. He criticized a cable-industry-funded study (PDF) released by Booz Allen Hamilton earlier this month.

The study warned that even partial a la carte could cost the cable industry between $17 billion and $34 billion, pushing up cable prices by 7 percent to 15 percent. It assumed that cable operators would need to deploy a digital set-top box for every TV hooked up to cable, at a cost of $185 per box.

"We think that's just bunk," said Cooper. "They have a whole series of costs that are just fiction."

A Booz Allen Hamilton representative will be on hand Thursday to defend the study.

FCC staffers, on the other hand, will try to make sense of an increasingly complex debate.