The battle for a la carte cable is resumed
Perhaps the most interesting media development this week is the resumption of the debate over cable pricing. FCC chair Kevin J. Martin has come out in favor of a la carte pricing on cable systems. In other words, cable subscribers would be allowed to pick and choose which individual channels they would like to pay for (beyond a basic tier of broadcast and cable networks). This is a sharp reversal of the FCC's previous position, which was to support the cable industry's desire to retain the current system of bundling channels into ever larger cable packages (this is of course very profitable for the cable operators). The motive for this new initiative is, as ever with the federal government, a desire to protect children from indecency and violence on television. It seems that many viewers would prefer to block--and not have to pay for--"edgier" basic cable offerings such as Comedy Central and MTV. Martin now seems to have concluded that the best way to protect the children is to allow subscribers to pick and choose their own channels. Cable operators argue that if this was mandated by the government, consumers would end up paying more for fewer channels.
The FCC has no power to mandate a switch to a la carte pricing--that power is left to Congress. But Martin is certainly in an influential position to get the debate moving. As for the cable industry, it has little public support for its current strategy, that could be construed as price-gouging unhappy cable consumers. For years the cable industry has been adding more and more channels to their cable lineups. Most viewers only watch a fraction of these channels--typically 17 channels out of an averagge of 88 available to subscribers, according to a 2004 FCC report (cited in USA Today on Nov 30). Yet since cable was deregulated in the mid-1990s, cable subscription rates have increased at well in excess of the rate of inflation. Many subscribers wonder why they're paying so much for scores of channels they never watch.
And now AT&T is backing the move to a la carte pricing. AT&T was for a while one of the biggest MSOs (Multiple System Operators); it got out of the business in 2001 when its cable operations were bought up by rival Comcast; but the company is now looking to get back into the game through promoting its own a la carte programming services.
(For a fuller insight into both sides of the argument, USA Today runs a pro- and con debate over a la carte pricing in its Dec 1 edition -- see here for the pro-pick and choose position and here for the leave-things-as-they-are argument.)