IP Democracy: FCC Chairman Raises Cable A La Carte Scare

Throwing fear into the hearts of not only cable operators but pretty much everybody in the communications world, FCC Chairman Kevin Martin plans to revive at a Senate hearing today the idea of requiring cable operators to sell their channels à la carte, according to the Wall Street Journal. At a Senate Commerce Committe forum on indency, Martin will announce that the FCC has conducted a second study on the issue, which is whether cable operators should be forced to sell their channels on an individual or “themed group” basis as opposed to large tiers of channels.

The first study conducted by the Commission, under the leadership of former Chairman Michael Powell, found that forcing cable operators to offer à la carte channels would raise the cost of cable service because cable networks would lose the value of being packaged together with their peers and be forced to raise their fees. This new report, however, apparently reaches the opposite conclusion.

The Journal article claims that Martin will advocate the use of à la carte to create “family friendly” tiers, a concept now backed by Senate Commerce Committe Chairman Ted Stevens (R-AK).

Although the notion of à la carte cable channel sales had its origins in the rising cost of cable service, with some consumer groups calling for individual channel sales as a cost-saving measure, the idea has been turned on its head by conservative “family values” advocates as a way of blocking indecent or inappropriate content. Martin has embraced the conservatives’ views on indency (see this Salon piece on Martin’s indecency campaign), hiring Christian activist Penny Nance as his key advisor on these matters.

Update: Martin’s full statement to the Committee is here. He justifies the à la carte effort by discrediting the report prepared under Powell.

Last year, former Chairman Powell and previous staffer Ken Ferree submitted a report to Congress concluding that a la carte and tiered pricing models (such as a family tier) were not economically feasible and were not in consumers’ interest. I had many concerns with this report, including the logic and some of the assumptions used. I asked the Media Bureau as well as our Chief Economist to take a more thorough look at the issue. The staff is now finalizing a report that concludes that the earlier report relied on problematic assumptions and presented incorrect and incomplete analysis.

Needless to say, the National Cable & Telecommunications Association is none too happy. In a statement, NCTA CEO Kyle McSlarrow said:

We can’t comment on any new FCC a la carte report until it’s released and we’ve had a chance to review it, but previous and recent analyses were consistent in their findings 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.

Posted by Cynthia Brumfield on November 29, 2005 7:04 AM to IP Democracy