A la carte cable could be a tough sell; Plan draws cheers but faces obstacles
Copyright 2005 Gannett Company, Inc.
November 30, 2005, Wednesday, FIRST EDITION
By Paul Davidson and Laura Petrecca
A suggestion by the nation's top communications regulator Tuesday to let consumers pay only for the cable-TV channels they want - upending the traditional cable-TV bundle - drew cheers from consumer advocates but caution from key lawmakers.
As a result, some experts say, it's unlikely that Congress will pass legislation any time soon requiring cable companies to offer "a la carte" pricing plans. Cable companies argue that a la carte would be a death knell for small cable channels that are now bundled with other stations.
More likely, some analysts say, is that the Federal Communications Commission's new conclusion will pressure cable and satellite companies to offer better ways for parents to screen cable stations that show risque programs. Legg Mason says the cable industry could allow parents to screen out channels such as MTV, FX and Comedy Central, which draw complaints from children's TV advocates.
Some consumer advocates applauded FCC Chairman Kevin Martin's conclusion that a la carte pricing could lower monthly bills for consumers.
"What happened today was (Martin) just blew an enormous hole in the fortress of the cable and broadcast monopoly," by demonstrating that (a la carte) truly could save consumers money," says Gene Kimmelman, co-director of Consumers Union.
"I'd like to be able to select just the cable channels I watch," says Bonnie Gluhanich of Muskegon, Mich. "Most of them are of no interest to me, so why should I pay for them?" But after the forum, Senate Commerce Committee Chairman Ted Stevens, R-Alaska, who chaired the event, said he would prefer that pay-TV companies devise voluntary solutions. He added, though, "If that doesn't work, then we have to find a way" to impose an a la carte requirement.Martin's conclusion is based on his staff's finding that a 2004 report was flawed in three ways:
*It said the average cable household, which watches about 17 channels, would see its bill rise 14% to 30% with a la carte. The average channel price would be $3.90 to $4.73, the report said, and only subscribers who paid for fewer than nine channels would save. The report said cable channels would have to raise prices to account for fewer per-subscriber fees and reduced ad revenue based on a smaller audience. They would also boost prices to offset higher marketing, customer service and billing expenses that would be triggered by a la carte.
Court TV has said it would have to charge at least $5 a month. A Bear Stearns analysis says popular stations such as ESPN and MTV also would have to increase prices.
But the study, according to the FCC staff, mistakenly included the broadcast channels on the basic tier in the 17-channel model. If those stations were omitted, the effect of a la carte on bills would range from a 13% drop in prices to a 4% increase, the new report is expected to say. Consumers who order as many as 14 channels would save money.
*It assumed every household would have to pay for a digital set-top box in order to order individual channels, raising monthly costs by $12. The new report suggests that a la carte could be offered only to those who already have digital boxes. Under that scenario, prices would actually fall about 2%.
*The report wrongly assumed that a la carte would prompt consumers to watch 25% less TV.Still, the National Cable & Telecommunications Association argues that a la carte would imperil the survival of small stations. Channels such as Black Entertainment Television and SiTV, a Spanish-language channel, attract viewers who can sample them as they channel-surf. Only a few subscribers, it says, might pay for them under a la carte.
The new FCC study is expected to counter that some cable channels, such as Urban Broadcasting, that aren't carried on most cable systems would actually benefit from a system that lets consumers choose them.
Still, some pay-TV providers say a better solution would be to let them reject some of the edgy cable channels owned by the big broadcast networks. Now, they must carry them as the price of receiving "must-have" stations such as CBS and Fox.