May 14 (Bloomberg) -- It’s time to let television viewers buy individual channels rather than being required to pay for bundles of programming, and to end blackouts of sports events in publicly financed stadiums, U.S. Senator John McCain said.
“Consumers shouldn’t have to pay for television channels they don’t watch, and have no interest in watching,” McCain, an Arizona Republican, told a Senate panel today.
McCain, a former presidential candidate, has introduced a bill to force cable and direct-broadcast satellite TV companies to offer channels individually -- or a la carte -- and to end blackouts of events such as National Football League games.
Cable rates have attracted congressional scrutiny before today’s hearing at the communications subcommittee led by Senator Mark Pryor, an Arkansas Democrat. The market isn’t working for consumers who are paying more for TV service, Senator Jay Rockefeller, the West Virginia Democrat who is chairman of the Commerce Committee, which includes the subcommittee, said at a July hearing.
“The most egregious of all is ESPN,” McCain said today in an interview on Bloomberg Television’s “Street Smart” program. “There are many, many people, unlike me, that don’t like to watch ESPN and yet they’re faced with the prospect of paying about $5 more in their cable bill.”
ESPN, owned by the Walt Disney Co., generates about $5.54 per cable subscriber each month, according to an estimate from research firm SNL Kagan.
The average cable bill for expanded basic service -- the most popular package -- increased 6.1 percent annually from 1995 through 2011, rising to $57.46 from $22.25, the Federal Communications Commission said in a report last year. The typical number of channels in such a package rose to 124, from 44, the FCC said. The price per channel dropped three cents, to 57 cents, the agency said.
Studies show a-la-carte pricing won’t save viewers money, in part because channels not in a package would suffer drops in audience and advertising revenue, said Michael Powell, president of the Washington-based National Cable & Telecommunications Association trade group.
“They are very likely to have to raise the individual price of that programming quite substantially,” Powell told senators. “It’s not a good deal for consumers to pay $10 for 10 channels when you were paying $10 for 100.”
Bundled channels offer value to consumers, ESPN President John Skipper said today at a news briefing in New York.
“Everybody thinks a $13 movie ticket is too high and a $6 cup of coffee is too high,” Skipper said. “The question is, is it enough value for you to keep paying? We don’t see yet any significant deterioration in the overall sub base.”
Consumers Union, an advocacy group based in Yonkers, New York, that advocates for fairness, has endorsed McCain’s bill.
“Cable customers have to buy larger and larger packages of channels,” Delara Derakhshani, policy counsel, said in a statement.
McCain’s bill would deny licensing privileges to pay-TV companies that don’t offer programming for purchase separately, and would keep broadcasters from demanding retransmission fees if they don’t let their channels be sold individually.
The measure also would require non-broadcasters such as Viacom Inc. to offer a-la-carte programming to pay-TV companies. In addition, it would revoke the airwaves license from a broadcaster that doesn’t send an over-the-air signal identical to the signal sent through pay-TV companies.
CBS Corp.’s CBS TV network and News Corp.’s Fox network have said they may go off the air if courts don’t block Barry Diller’s Aereo Inc., which accesses broadcast TV signals and resells them online for $8 to $12 a month -- without paying a retransmission fee.
No hearing date has been set for the bill, and no votes have been taken.
It’s unlikely McCain’s bill will pass, “but it is still relatively early” in the congressional session that runs through next year, Paul Gallant, Washington-based managing director at Guggenheim Securities, said yesterday in a note to clients. McCain isn’t a member of the Commerce Committee that handles TV legislation and it isn’t clear if Rockefeller will push the issue, Gallant said.
McCain said the rule allowing sports blackouts barring local broadcasts of games that don’t sell out is “antiquated.” The rule, which dates to 1975, is aimed at ensuring that enough fans attend the events.
“If the taxpayers pay for it, by God, I think that the taxpayers ought to be able to see the game, whether they sell out the stadium or not,” McCain said.
Five senators in a letter to the Federal Communications Commission last year called for an end to such blackouts. The agency is considering voiding a rule that prevents cable and satellite companies from showing pro-sports games when local TV broadcasts of the events are blocked by contract.
The rule lets fans receive free, over-the-air TV broadcasts of event while also promoting the excitement of a live games before full stadiums, the NFL said in an FCC filing.
Cable and broadcast groups in testimony submitted to Pryor’s committee said changes aren’t needed.
“The system is not broken,” and changing laws that govern programming distribution “is not in the public’s best interest,” Gordon Smith, president of the National Association of Broadcasters, said in submitted testimony. Members of the trade group in Washington include networks such as Burbank, California-based Disney’s ABC, Fox, Comcast Corp.’s NBC and CBS.
Lawmakers generally don’t need to intervene in the marketplace, which is competitive, Powell said in written testimony. Members of the Washington-based cable group he leads include Philadelphia-based Comcast, largest U.S. cable company, and New York-based Time Warner Cable Inc., the second-largest.
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