Don't unravel cable TV bundles

March 20, 2006|By ELIJAH E. CUMMINGS

WASHINGTON -- As Americans watched the Winter Olympics in Turin, Italy, this year, we enjoyed the acrobatics of world-class athletes. But back in Washington, a supposedly expert government agency was engaged in a less-inspiring kind of acrobatics - a flip-flop that could lead to higher cable television bills for consumers and less opportunity for television programmers.

The less-than-elegant back flip was a highly questionable effort by the Federal Communications Commission, which reversed itself in a report that endorses a new federal regulation that would allow cable television viewers to be charged on a per-channel basis. The idea has come to be known as a la carte pricing.

Nearly every independent expert - including the Government Accountability Office, several private studies and a prior ruling by the FCC - has concluded that per-channel charges would result in price increases for most consumers while also threatening the viability of smaller, emerging cable networks.

Why? Part of the answer is that most cable programmers depend on the bundling of channels within the "expanded basic" tier - the common platform for many programmers - for their survival.

Once it is included in this grouping of channels, a new network can be seen by millions of channel-surfing viewers who otherwise might never become aware of the network's existence - an irreplaceable marketing tool for any new programmer. It is also important to realize that advertisers are willing to pay premium rates for new programming because of their potential audience on this expanded basic tier.

This platform from which millions of viewers can be exposed to a new network and the advertising premiums that can now be derived from this potential audience are the economic incentives that a programmer needs when launching a network, a venture that can cost more than $100 million.

This is why nearly every report on the subject, including a more thorough FCC report in 2004, has concluded that a la carte pricing would likely lead to the "demise of a substantial number of these [niche and minority programmer] entities, which will reduce the overall universe of channels."

By eliminating these economies of scale, a la carte pricing "could put us and many other innovative cable networks out of business," wrote Alfred C. Liggins III, CEO of the African-American television network TV One.

When I chaired the Congressional Black Caucus, my colleagues and I noted in a letter to the Senate Commerce Committee that minority, religious and other niche programming will be under siege if programmers are no longer offered as part of a cable package. Further, a la carte pricing would drastically reduce the diversity of programming that audiences experience on television today.

Major civil rights organizations and major programmers agree, as did former FCC Chairman Michael Powell.

The logic of the market supports this skepticism about any benefits to be derived from a la carte pricing. Because the current system reduces programmer costs, it also encourages lower cable prices. Indeed, nearly every study has shown that consumers who watch more than 11 cable channels would end up paying higher cable rates under a pay-per-channel regime.

For reasons that are less than clear, the latest FCC report blithely dismisses all of this evidence that a la carte pricing would substantially reduce program diversity and weed out many of the smaller networks.

It is worth noting that this same type of cavalier dismissal with respect to the importance of media diversity is what got the FCC in hot water during the 2002 media concentration fiasco. What is leading the FCC down this ill-advised path?

Some think that the new FCC chairman, Kevin J. Martin, pushed this change in the agency's position in order to curry favor with social conservatives. If this were the case, however, Mr. Martin seems to have stumbled there as well.

The leading religious broadcasters, such as the Rev. Jerry Falwell, vehemently oppose Mr. Martin's proposal. The Speed Network, the major television outlet for NASCAR racing in Mr. Martin's home state of North Carolina, also opposes the idea.

Rod Tapp from the Inspiration Network has promised to march 20 million religious conservatives to Capitol Hill in order to stop it.

That so many programmers, academic experts and prominent voices on both the political left and right say that a la carte pricing will raise prices on consumers while reducing diversity in programming should tell us something.

It should tell us that the heavy hand of government regulation should leave this one alone.

Elijah E. Cummings represents Maryland's 7th Congressional District in the U.S. House of Representatives. His e-mail is at www.house.gov/writerep.

Baltimore Sun Articles
|
|
|
Please note the green-lined linked article text has been applied commercially without any involvement from our newsroom editors, reporters or any other editorial staff.