Networking: FCC eyes a la carte pricing

December 5, 2005

A new regulation advocated by the chairman of the Federal Communications Commission may change the way cable network providers price services -- leading some to offer programming on an a la carte basis and enabling consumers to choose exactly the kind of programming they want delivered, experts tell United Press International's Networking.

The policy proposal, for so-called a la carte programming, is designed by FCC Chairman Kevin Martin, an appointee of President Bush, to drive down the pricing of cable packages and improve programming content.

Some experts, however, think it may have greater cultural implications than economic ones and may even slow the spread of high-speed broadband networks.

"Couldn't this continue the overly personalized media world -- with conservatives opting to not pay for MSNBC or CNN?" Matthew T. Felling, media director at the Center for Media and Public Affairs, a think tank in Washington D.C., told Networking.

Left-leaning consumers, meantime, might permanently tune out Fox News and conservative shows like "The O'Reilly Factor" and not just change the channel in angst.

"Will the new format take away from viewers' pleasure at happening upon some programming that they wouldn't have expected?" asked Felling.

The cable industry, meantime, isn't that thrilled with the proposal.

Cable companies are very disappointed that FCC head Martin is revisiting the a la carte issue, because the subject has already been extensively studied by the FCC itself and the investigative arm of Congress, the Government Accountability Office, said Jaime Bianchi, a partner with White & Case, based in Miami, who advises clients in the communications and cable industries.

"Both of those studies concluded that a la carte would decrease the diversity of programming available to subscribers and not reduce the cost of cable programming. It would decrease the number of cable programming available because many smaller services -- in particular those services in other languages -- would not be carried," said Bianchi.

That could have free-speech implications, experts said.

A statement released last week by Kyle McSlarrow, president and chief executive officer of the National Cable & Telecommunications Association, develops that theme further, claiming that "government pay-per-channel regulation would be likely to hurt consumers by increasing prices, decreasing choice and reducing diversity in programming, and it would do so in a way that violates the First Amendment."

What is more, McSlarrow said, the policy would be "troublesome" for the goal of universal deployment of broadband services. "Such a massive government intrusion into how a broadband service like video is marketed, offered and priced would undoubtedly chill the needed innovation and investment necessary to build out capital intensive networks that rely on the marketplace to determine the most economically effective way to provide a return on investment," said McSlarrow.

But not all experts are critical of the FCC's proposal. Jason Shrinsky, a partner and chairman of the telecommunications practice at the Washington office of the law firm Kaye Scholer, told Networking that "Kevin Martin is pushing this simply as a first step to try to show that the commission under him is pro-active."

There are questions about whether the FCC, however, will be the final policymaker on this controversial issue and where it is getting its information, given the fact that two studies previously have examined the facts.

"I'm curious as to what new data they are relying on with the new report concluding that consumers could pay less for each channel," said Shrinsky. "From the FCC's standpoint, the new report is a very worthy effort by Chairman Martin to try to get the ball rolling in brokering a deal with the cable industry to lower rates and improve content. Although the Congress is important in drafting legislation, ultimately, the indecency aspect will be decided in Courts."

A senior executive at a company that provides user interfaces, design and technology for four of the major cable companies in the United States -- and works with Fox, TimeWarner and Disney -- thinks too much is being made of the proposal and that such concern may be premature.

"It's unlikely that this regulation will proceed," said Trevor Kaufman, chief executive officer at Schematic, based in Los Angeles. "There are many ways of addressing consumers' decency concerns that are far less complicated than changing the cable business model to enable a la carte. If the imposition of a la carte system seems imminent, cable companies will likely propose compromises that protect consumers as well as their own business models."

Copyright 2005 by United Press International

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