FCC Supports Program Bundling - in a la Carte Report
A long awaited FCC a la carte report backs bundling of cable networks into packages of programs. A revised analysis of a 2004 Media Bureau study never voted on by commissioners, the report suggests alternatives to current pay TV program regimes. None of its 3 options - mixed bundling, themed tiers and subscriber selected tiers - would have cable and DBS providers sell channels only on an individual basis. This had observers scratching their heads at a disparity between pressure from Chmn. Martin for a la carte and findings of a controversial report he requested.
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Capitol Hill reaction was mixed. Sen. McCain (R-Ariz.) said he'd use the report as ammunition to propose a la carte legislation. “I will soon be introducing legislation that would entice all providers of TV services to offer an ‘a la carte’ option in addition to a package of channels in return for regulatory relief,” McCain said in a prepared statement: “The report confirms what I have believed for years.” Senate Commerce Committee colleague Chmn. Stevens (R- Alaska) voiced caution. “If a la carte is not more expensive for consumers, I'll support an effort to take such an approach,” he said. That action would be “subject to discussions with providers on the downside of such a process,” Stevens said.
Cable rates would drop 3%-13% with a la carte in 3 of 4 scenarios in a cable industry-backed Booz Allen Hamilton study FCC officials have said contained errors, the new report said. But it had no more details on savings consumers might enjoy if they could choose which networks to purchase. Instead, it described hypothetical cases in which consumers preferring a particular channel would pay less for it if they could buy it separately. “With bundling, consumers pay more than they would under pure a la carte, without getting more service,” said the document.
The report, which has no analysis of a la carte, instead focuses on a critique of the earlier study, said 2 observers we spoke with. “It’s really all focused on the bundling and types of bundling and never really gets to the pure a la carte analysis,” said Womble Carlyle’s Ross Buntrock. “I'm surprised it’s not a little more meaty, given the time it took to get it out.” The report lacks “clear data regarding the consumer benefits of the hybrid solutions,” Adam Thierer of the Progress & Freedom Foundation said: “They turn around and provide more pragmatic middle ground solutions to move away from a radical pure a la carte proposal.” The report pushes cable discounts via different packages to boost consumer choice, said a person familiar with work on the study. FCC officials didn’t respond to our inquiries.
Buyers could get as many as 20 channels “without seeing an increase in their monthly bills,” the report said. At a minimum, one could get 14 channels without paying more, it said. Booz Allen calculated that figure at 9. A person in on the report’s development said earlier it found the average subscriber’s outlay to be as much as 46% less for a channel, calculated using the FCC’s slightly rejiggered formula (CD Dec. 1 p2). That figure didn’t appear in the latest document.
Video providers could let customers choose between buying channels separately or paying “the bundled price,” the report said. The mixed bundling approach is similar to VoD, it said. Themed tiers were listed as another alternative. Subscribers could buy a package of channels devoted to a certain genre, said the report, pointing to family tiers planned by Comcast, Time Warner and peers. The final option, subscriber-selected tiers, would let subscribers buy a smaller package of channels typically offered with expanded basic service. “A subscriber could purchase a smaller package of perhaps 20 or 40 or 60 networks for a reduced price,” said the analysis. It cited similar efforts by Canadian cable operators, including Rogers and Videotron.
NCTA, a vehement opponent of govt.-mandated a la carte, scorned the report. The report “is disappointing,” NCTA Pres. Kyle McSlarrow said: “The notion that the government knows how to improve on a competitive marketplace is not supported by the evidence. Over the last 25 years, the American free enterprise system created the most diverse video programming on Earth.” Cable operators are split over individual channel sales; Cablevision is the largest operator to support such a plan (CD Jan 30 p7). NCTA criticisms were echoed by Inspiration Networks and other small programmers. “Implementing pay per channel rules will mean the end of smaller networks that currently provide consumers” with diverse shows, said Inspiration. The Commission’s document offered some support for such fears. “A la carte would weed out those networks that consumers value at less than the networks’ costs,” it said. “Some larger, established networks might be able to rely on existing brand name and thus avoid increased marketing costs.”