Martin a la Carte Remarks Get Mixed Responses from Industry

Martin told an ACA conference Tuesday that programmers should let pay-TV companies offer on an a la carte basis channels costing more than 75 cents monthly per subscriber. The comments drew industry attention because Martin is thought to want to circulate an order mandating that programmers let pay-TV companies sell channels unbundled (CD March 31 p2). But he hasn’t circulated such an order, an FCC official said. Martin also stumped for a la carte at a House appropriations hearing Wednesday and at a Tuesday Senate Commerce Committee DTV hearing.

“We commend the chairman for focusing on potential solutions to problems arising from the wholesale practices of programmers and broadcasters,” said ACA Vice President Ross Lieberman. “The abuse of market power by powerful broadcasters and programmers when dealing with smaller distributors continues to reduce choice and raise costs at the retail level.” ACA wouldn’t say if it thinks the FCC has authority to mandate so-called wholesale a la carte.

PTC Public Policy Director Dan Isett said the FCC seems to have such power under program access rules barring channels from being withheld from pay-TV companies if the programmer is affiliated with a cable operator. “The program access rules are being gamed by the programmers to leverage more and more expensive content into the expanded basic tier,” said Isett, whose group frequently complains to the FCC about what it deems indecent content. As much as $7 of the monthly cost of expanded basic cable packages, which run about $50, comes from sports, estimated Isett. Bills would be lower if people could buy only the channels they want, he said: “Why not simply say let people take it if they want?”

That wouldn’t work, said an ESPN spokeswoman. The sports channel could cost $28 monthly sold on its own, she said, citing a November Sanford Bernstein & Co. estimate. Some channels’ prices would rise under a la carte pricing because many subscribers now subsidize them, cable executives have said. The Disney Channel cost $15 a month in the early 1990s as a premium service, and would cost more sold that way now, said the spokeswoman. But, calculating what the Disney channel costs as part of an expanded-basic package, cable customers get it for less than $15, she added. Programming costs as a percentage of cable operators’ total expenses have remained the same for at least the past 8 years, she said.

The FCC has no “jurisdiction or legal authority” to order a la carte because it doesn’t regulate programmers not tied to cable operators, said the ESPN official. An NCTA spokesman said the group believes the agency lacks authority to require unbundling of channels. Two cable lawyers agreed, saying that section 628 of the 1992 Cable Act was written narrowly to give the commission oversight only of channels affiliated with operators. In 1992, lawmakers never expected the law would apply beyond such vertically integrated programming, said a lawyer. Under the Act, the FCC can’t bar programmers from giving discounts on content to those who carry many channels, said the attorney.

A group of cable overbuilders wants the FCC to study the issue of program access before issuing rules. The digital transition may bring many changes to carriage deals, Broadband Services Provider Association Executive Director John Goodman said. “There are too many unknowns right now,” he said. Association members have met with aides to commissioners and lawmakers and with other companies and organizations to push for an FCC study, said Goodman. “We've found a lot of interest” among companies, he said. “There’s been more interest and support than not.”