April 23, 2006, 7:20PM Choosing from the cable menu Viewers face new decisions
By MIKE MCDANIEL Houston Chronicle http://www.chron.com/disp/story.mpl/ent/tv/3813839.html A la carte or status quo? That is the question facing the cable television industry. Powerful people in Washington, including Sen. John McCain (R-Ariz.) and Federal Communications Commission chairman Kevin Martin, believe a la carte cable would not only trim a subscriber's monthly bill currently averaging between $48 and $49 in Houston, according to Time Warner but also allow consumers to decide which channels are allowed in their homes. McCain, chairman of the Senate Commerce Committee, plans to introduce a bill this week that would free new cable competitors from local franchising regulations. In the House, U.S. Rep. Nathan Deal (R-Ga.) has said he will offer legislation allowing consumers to choose the channels they want. But powerful people in business, including the CEOs of cable carriers and cable networks, believe pick-and-choose would cost consumers more. They also say a la carte cable would starve niche channels, which rely on the current bundling, or tiered, system of carriage to stay in business. The a la carte issue, as old as cable TV, has become news again because of a February FCC report that refutes claims made in a 2004 FCC study that suggested a la carte would indeed lead to higher cable bills and the shutting down of niche channels. What happened between 2004 and 2006 to merit the newer report? The chairman of the FCC changed. Out went Michael Powell in January 2005. In came Martin in March 2005. Both are appointees of President Bush, but Powell took more of a pro-business approach while Martin seems more interested in social change. Martin decided to revisit the 2004 FCC report. He believed there could be a different outcome. There was. The February report cited several mistakes in the 2004 study. One was a math error that, corrected, shows a subscriber could receive as many as 20 channels, including six broadcast channels, and see their monthly bills decrease by 3 percent to 13 percent. "The chairman is not advocating a pure a la carte system, per se," said an FCC official speaking on his behalf. "What he's saying is that there are different ways to implement an a la carte pricing option for consumers that would benefit the consumer. He's saying you could do a la carte or tiers. Maybe some consumers would choose the tiers they currently get, simply because it's easier than changing." Martin also sees a la carte as an answer to viewers who say they receive unwanted and profane programming under the bundling method the cable companies currently employ. In a preemptive move in this regard, Time Warner and other cable companies recently introduced a "family friendly" tier of 16 G-rated channels. The tier contained no sports or movie networks, nor such offerings as History Channel or Cartoon Network, because there's no guarantee those channels won't cross the G-rated line. (Indeed, Cartoon Network offers adult programming during late-night hours.) Cable companies also claim that they have made it possible for digital subscribers to set parental controls and have spent millions in advertising that capability. Still, fewer than 4 percent of their customers make use of it. Martin said he has "legitimate concerns" about the "family friendly" tiers that were offered. He has the backing of the Parents Television Council and other conservative groups. "We believe the family tier is a product that's designed to fail," said Dan Isett, PTC's director of corporate and government affairs. "It does nothing to solve the problem, which is that families are not free to decide for themselves what constitutes a family tier." A la carte opponents largely come from within the cable television industry. "The overwhelming body of evidence clearly shows that consumers will pay more and get less with a la carte," says George Bodenheimer, co-chair of Disney Media Networks and president of ESPN Inc. and ABC Sports. "What people are talking about having us do would be tantamount to asking the Houston Chronicle to break the newspaper up and sell it by the section," says Ron McMillan, president of Time Warner Houston. "As a consumer I may say I don't read anything but the sports and business pages, so I just want those two sections, and I don't want to pay full price." A la carte opponents say a change in the economic model would be fatal to all but the biggest channels. The History Channel, VH1, National Geographic and Hallmark would have to charge as much as HBO to continue. And because network revenue would decline, so would the number of original programs. The FCC's February report suggests that the market should dictate a show's survival. "If a switch to a la carte eliminated such programming," the report states, "the result would not be a blow to program diversity but rather a restoration of programming to an efficient level, more consistent with consumer value." Ironically, technology is advancing so quickly that the a la carte plan may be irrelevant before it's even enacted. "I don't think it's necessary to push a la carte because in various ways it's going to happen as we see many more ways of distributing video," says Michael Rogers. Rogers, former head of the Washington Post Company's new media division and currently a columnist on MSNBC.com, believes the proliferation of platforms cell phones, iTunes and especially the Internet has already made a la carte a nonissue. But Time Warner's McMillan thinks the same issues will linger because of the cable industry's business structure. "The next step is something called 'switch digital,' " he says of a plan that joins television and the Internet. "But even then I don't think we're going to be able to set aside the contracts we've got with all of our suppliers and say (to the consumer), 'You're going to be able to buy this a la carte.' You would have to renegotiate all those contracts. "And if I own Speed Channel (an auto racing network), what do you think I'm going to ask for that programming on an a la carte basis versus a broadcast basis as part of a tier? They're going to ask for more money. The reason: They're going to be taking a bigger risk because that channel won't be grouped with other channels. (The smaller channels) believe, and I concur, this would hurt their ability to draw advertising." Rogers thinks that even if the cable companies figure out a new way of doing business, all cable channels not just smaller, niche networks are in jeopardy. "Nothing happens as quickly as futurists say it will," he says, "but it's pretty clear a major shakeout is coming in terms of how video gets into the home." ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu Reply with a "Thank you" if you liked this post. _____________________________ MEDIANEWS mailing list [email protected] To unsubscribe send an email to: [EMAIL PROTECTED]
