Monday, December 12, 2005

The battle for à la carte cable is resumed

One of the more interesting media developments in recent weeks 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 these days, a desire to protect children from indecency and violence on television. (It seems that, in terms of regulation in the "public interest," the cry of "indecency" is the only call to action that federal regulators pay attention to anymore.) Martin now thinks it would in fact be a good thing to let viewers 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. (And big cable Multiple System Operators such as Time Warner and Comcast are now scrambling to head off any possible regulatory moves.) But for years the cable industry has blithely added 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.)

Lastly, it's interesting to see how this debate mixes up the ideological debate over free choice, consumer rights, regulation/deregulation, and the public interest. Those on both the left and the right seem to be divided over whether a la carte - and government moves to mandate and regulate a move to a la carte - would be a good thing. The more interesting debate, if only because it involves the people who are actually in charge of everything these days, is within the right - between, on the one hand, social-cultural conservatives operating from an indeceny-morality frame, and on the other, economic conservatives who favor leaving the market alone. The latter position is summed up by the Wall Street Journal's Holman Jenkins (thanks to a faculty colleague for pointing me to this), who notes in a WSJ commentary piece (taken from the Benton Foundation Comm Policy listserv - original requires subscription):
    What about this "à la carte" debate? Supporters prattle about consumer rights, but consumers don't have a right to anything except that which somebody is willing to sell to them (without force or fraud). And everything we buy is really a package deal. Buy a garden hose at Wal-Mart and you're purchasing both a manufactured good and a service (Wal-Mart's logistics chain). Don't listen to any ninny who tells you that, because you're entitled to buy ketchup without buying mayonnaise, you should be entitled to buy ESPN without buying CNN. You can buy ketchup without mayonnaise because somebody is willing to sell it to you. In turn, you've demonstrated a willingness to make it worth his while. Today's basic cable package represents a complex set of bargains involving not just cable providers and subscribers, but two other parties: advertisers (who help pay your cable bill) and programming suppliers (who use the bargaining clout of their popular networks to get their niche networks on the air too). It's a solution that works: Everybody pays the same basic rate for channels they mostly don't watch, which is no different from saying they pay the same basic rate for the few channels they do watch -- but a lot more tastes are satisfied.

As I say, this is an interesting wrinkle on the traditional left-right bun fight over free choice, consumer rights, etc. The "solution that works" referred to above sounds surprisingly communitarian to me (at least insofar as it dovetails with commercial interests). In any contest between what individual consumers want and what big business wants, it's clear where Jenkins' loyalties lie. But one thing that Jenkins says is likely to find more general agreement: "Technology is likely to render the whole issue moot. The concept of a 'channel' is an eroding one. Internet TV will be more akin to a library, in which you order up for instant viewing the fare you care to receive."

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