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Cable a la Carte: Choice vs. Cost?

Federal Communications Commission Chairman Kevin Martin sent a clear message to cable companies on Nov. 29: Give customers a choice. In his testimony before the Senate, Martin lamented a significant upswing in sex and profanity on TV in recent years and upbraided broadcasters for running "some of the coarsest programming ever aired." As a fix, the FCC chairman said he would propose the adoption of "a la carte" programming, whereby customers could choose just the channels they want or opt for a family-friendly tier of channels.

The comments reignited a public debate over decency on TV and the government's role in regulating media. Some politicians and conservative lobbying groups lined up behind Martin, while many cable companies, including Time Warner's (TWX) cable division, said a la carte programming would result in higher prices and fewer choices for consumers.

"A la carte is one of those things that sounds good but wouldn't be good in practice," Time Warner CEO Richard Parsons said at a Dec. 6 press conference. Some observers say government-mandated a la carte programming won't fly because the logistical hurdles are too high (see BW Online, 11/30/05, "The FCC's Cable Crusade Continues").

YEARS AWAY. But assuming Martin does get his way, would the customer really have more choice? Cable companies generally say no, arguing that a la carte pricing would reduce the diversity of programming available and that the overhead needed to implement a pay-per-channel model would only drive up prices for consumers. A notable exception is Cablevision (CVC), the largest cable-TV provider in the New York area. "A la carte will result in a more affordable service for all, with more programming options," it said in a Dec. 1 statement. "Consumers should not be obliged directly or indirectly to buy services they do not want."

While it may be years before any such model is put in place and it's hard to say how the end result will look, a consensus is emerging that some channels would suffer -- if not fall away altogether. Content providers now compel cable operators to offer their niche channels by bundling them with must-haves like ESPN or MTV. Without being bundled into a bigger package, less popular channels such as ESPN Classic and MTV2 could struggle to garner a large enough audience to survive.

A la carte would also make it much harder and expensive for programmers to launch new channels and build an audience, if they have to convince new viewers to pay to watch in the first place.

MUTED INCREASES? On the question of pricing, some consumers could lose out in a scenario where they're forced to pay on a channel-by-channel basis, analysts say. Still, cost increases are likely to be muted in homes that already have digital TV packages. In those cases, each set already has its own set-top box, and similarly tiered packages exist -- whether they include specific premium channels, sports extras, foreign channels, or video-on-demand features that customers select individually.

"You can get your basic broadcast replication," says Laura Behrens, a media analyst with Gartner. "You can get basic cable, and then you can add subscription services. We already have all of that."

Whatever the impact on pricing, consumers in many ways are already able to exercise a lot of choice over the channels they watch. They're increasingly able to pick and choose what they watch and when they watch it. And most digital-cable boxes let consumers block out channels entirely. A government push may actually result in a wider range of packages, including some that include family-friendly channels, says Andrei Jezierski, a partner at venture-capital consultancy i2 Partners in New York.

LET 'EM DIE. And some of the unintended consequences of a push toward a la carte pricing wouldn't be so bad either, some observers say. The loss of some channels may not be tragic. "The programming is pretty weak on these [secondary channels] by and large," says says Paul Schneider, an associate professor of film and TV at Boston University. "There's not that much original programming, and it's getting spread so thin in some areas that it should start to cancel itself out."

Content providers could be pushed to consolidate their best programming onto a few channels and launch only the most promising new channels, rather than crowding the airwaves with extras in order to grab market share. So even if the push toward a la carte pricing doesn't result in lower prices -- or less profanity -- it might improve viewing quality in other ways.

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