A la carte TV

By Marguerite Reardon
Staff Writer, CNET News.com

Published: December 5, 2005, 4:00 AM PST

TalkBack

E-mail

TrackBack

Cable TV prices are on the rise, but consumers complain there still isn't enough flexibility in the programming packages offered by cable providers.

That could change if the Federal Communications Commission and TV distributors Cablevision and AT&T have their way. Last week, FCC chairman Kevin Martin told a forum sponsored by the U.S. Senate Commerce Committee, which has been examining indecency on radio and television, that consumers could have more choice in what they view for cheaper prices if operators would sell content a la carte.

According to a new report from the FCC that has yet to be made public, a la carte pricing could actually reduce monthly cable bills for many consumers while also providing more control over what channels they watch at home.

News of the FCC report comes just as many large cable operators across the country announced that they are raising rates again for their service. Starting in January 2006, Comcast will bump up the price of its most popular cable package by 6 percent. Time Warner, the nation's second-largest cable operator, plans to raise its rates an average of 3 percent for its expanded package and 2 percent for its limited basic. And Cablevision will raise rates an average of 2 percent.

News.context

What's new:
Arguing that it would reduce subscription costs and give consumers more control over what they watch, the FCC and two cable operators propose offering TV programming a la carte.

Bottom line:
Content providers and other cable companies say unbundling programs will force increases in ad rates--and, therefore, subscriber rates--for the most-popular programs. Consumer advocates counter that with a la carte options, programming will get better as content providers compete for viewers.

More stories on this topic

What's more, consumers--especially those with children--are becoming increasingly agitated by the amount of violence and sexual content that comes into their homes on channels they'd rather not receive as part of their subscription package.

"At the FCC, we used to receive indecency complaints by the hundreds," said Martin in front of the Senate committee. "Now they come in by the hundreds of thousands. Clearly, consumers--and particularly parents--are concerned and increasingly frustrated."

But content providers and most of the cable industry say that offering programming piecemeal will result in even higher prices and less choice for consumers. They argue that such a pricing structure would infuse enormous technical, marketing and transaction costs into the business. They claim that an a la carte model would require consumers to lease a separate set-top box for each TV.

They also claim that an a la carte pricing model would increase overall subscription rates and reduce diversity of programming, because many of the niche or special-interest channels today are bundled with more popular channels. If these less-popular channels are sold independently, they will become too expensive to offer. And if these channels go away, advertisers have fewer places to show their commercials. The losses in advertising would have to be offset by consumers paying more for their favorite channels.

"We can't comment on any new FCC a la carte report until it's released and we've had a chance to review it," said Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association (NCTA). "But previous and recent analyses were consistent in their findings that government pay-per-channel regulation would be likely to hurt consumers by increasing prices, decreasing choice and reducing diversity in programming, and it would do so in a way that violates the First Amendment."

The bundle quandary
The way the cable packages are set up today, families who may want basic cable for channels such as Nickelodeon and the Cartoon Network are also forced to subscribe to channels such as MTV or Fox's FX, which often show programs that may be inappropriate for children.

Martin, as well as several consumer groups, say it's time that consumers have more choice in which channels they subscribe to. They believe this will not only help control costs, but it also would allow consumers to subscribe only to content they want to watch.

"People are not satisfied with what cable companies are offering them today," Kenneth DeGraff, a policy advocate at Consumers Union, the publisher of Consumer Reports. "Families are being told they have to subsidize content they find offensive. And the cable companies keep raising rates. They may throw in a few more channels, but no one ever asks consumers which channels they want."

The idea of allowing consumers to pick and choose which channels they want to subscribe to is nothing new. Cablevision, a cable operator in the Northeast, has been advocating the change for years. And just this week, the firm reiterated its support of the a la carte option for customers.

"We do not believe in the long term that selling programming a la carte will be detrimental to either programmers or cable operators," Charles F. Dolan, chairman of Cablevision's board of directors, said in a statement. "On the contrary, our experience indicates a la carte will result in a more affordable service for all with more programming options."

AT&T, formerly SBC Communications, has also thrown its support behind the a la carte option. The company is currently upgrading its broadband network and deploying more fiber optics to be able to offer a paid TV service.