America's Cable Cabal Rejects FCC Unbundling Report

17 March 2006

The US cable industry is distinctly underwhelmed by a Federal Communications Commission report published Wednesday that effectively recommends the unbundling of predetermined channel packages offered to consumers.

The report argues that many consumers could reduce their monthly cable bills if they were permitted to subscribe only to the channels they want - although FCC spokeswoman Tamara Lipper concedes it "does not conclude that every consumer would pay less."

She added: "But they'd have more choice by having the option to pay less."

On a different tack, FCC chairman Kevin Martin favors a la carte, partly because consumers would not have to pay for violent or risqué programming they don't want to watch.

In addition, the FCC repudiates its own 2004 report opposing the a la carte option. It now beleives that niche channels, often packaged in a tier of digital services, might be stronger under a la carte: "Consumers could order them without paying first for expanded basic networks."

In a coordinated counter-attack, the National Cable & Telecommunications Association and Walt Disney Company each released a separate study that unsurprisingly reached similarly hostile conclusions.

Namely that the FCC made errors in its analysis, and as a result, favors a policy of a la carte pricing that would result in higher prices as well as fewer and less diverse programming options."

The NCTA report (prepared by Michigan State University) argues that consumers opting for a la carte would need a digital set-top box, adding to the cost of the service. "At least 60% of cable customers don't have a digital box," claims NCTA's Daniel Brenner.

While from the Disney wing of the pincer movement, evp for government relations Preston Padden disparaged: "A la carte is such an appealing and superficial sound bite."

He claimed the price of Disney's ESPN would have to rise to $20 monthly to remain on the air. "All of the academic and Wall Street research indicates that at the end of the day, the expanded basic bundle is the most efficient way to sell programming."

However, the Consumers Union stands four-square behind the FCC. CU spokesman Gene Kimmelman dismisses the NTCA and Disney reports as a sign of "industry hysterics".

He points out: "In Canada, you can buy a la carte as many channels as most Americans watch for about 20% less. In France, you can get ESPN for 40 cents a month, so it's hard for me to believe it would be $20 here."

Data sourced from USA Today Online; additional content by WARC staff