FCC Talks "A La Carte" Cable

FCC Chairman Kevin Martin thinks your cable bill is too high.

Hell, Mr. Martin probably thinks his cable bill is too high.

According to USAToday, Martin is going after “tying,” a practice broadcasters use to bully cable companies into carrying more channels on basic cable. More channels (think ESPN 8 “The Ocho”) mean higher cable rates, says Martin. He thinks curbs on tying will help stop cable bill increases for consumers.

“The problem for consumers is that they have to pay higher rates for a bunch of channels they may not want or watch,” Martin says, “Cable TV rates have continued to rise above the rate of inflation. I’m hopeful that this would help control the rate of increase of cable rates.”

The cable companies are with Martin on this one.

Cable operators have tried to get around tying for years, says Matt Polka, president of the American Cable Association, which represents hundreds of small cable TV operators. “At a time when (cable consumers) are screaming for choice, there is none, largely because of consolidation and control of content.”

Polka says programmers also use ownership of broadcast networks and stations to force “carriage” of channels. ABC is owned by Disney, NBC by General Electric (GE), CBS by Viacom and Fox by News Corp (NWS). All have cable arms that create new channels regularly.

Cable operators are required to carry all local TV stations, but federal rules let broadcasters pick how they want to be paid: Cash or carriage of their company’s cable channels.

Polka says programmers typically set the cash price so high that operators have little choice but to agree to take their channels. Recently, they’ve even started to demand support for their websites, he says.

Martin says that under the bar on bundling that the FCC plans to examine, programmers would have to sell channels individually. “You can’t tie the channel in any way. … If you only want one channel, you shouldn’t have to take 10 or 20.”

Tying also has a less-obvious downside for consumers: It allows big programmers to pack cable TV with their channels, leaving less room for channels from other providers.

FCC puts ‘a la carte’ cable on the menu [USAToday]

Comments

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  1. Lin-Z [linguist on duty] says:

    If i could pick and choose tv channels, I might actually get cable!

  2. getjustin says:

    Good on Martin for actually looking into what the consumer might want. My wife and I are doing without cable because we don’t want to pay $55 for 80 channels, of which we’d only watch about 6. Gimme my Comedy Central, Food Network, Discovery, and ESPN for about $15 or so and we’ll talk.

  3. Schmee says:

    I dropped cable due to it costing too much, and I only watched a handfull of channels. I don’t need 15 encore channels, the starz pack, and at least 30 other channels I never watched. But to get a package that had the channels I actually wanted to watch that was what I had to buy.

    I hope this actually goes through

  4. RvLeshrac says:

    It won’t help prices. Cable providers are used to the current pricing structure, as are consumers – they aren’t going to charge less, since consumers are willing to pay the current ridiculous cable prices.

    That said, if cable companies DID offer a la carte pricing, and assuming it isn’t completely ridiculous (I’m not paying $5/channel), it would be awesome.

  5. JayMo says:

    I work for a major cable company in cananda, and up here we are still not allowed to make the jump to 100% digital (government wont let us break everyones TVs)therefor this is impossible for us to do.

    But just think of all the subscribers we would gain if they could pick and choose what channels they got. Say $2/channel/month. you cant tell me you actually watch all 70 channels on full cable.

    better yet, I’d like to see all TV shows go “on demand”, where you can purchase seasons of your favorite shows in advance, and shows are released to the VOD system the same day the show is aired. You then have permanent access to the shows that you have “purchased”. That is true a la carte in my mind. (I only watch a 3 or 4 shows)

  6. MercuryPDX says:

    I would sign up for this in a heart beat. There’s currently about 18 out of the 70 channels I get that aren’t even programmed into the TV or Tivo. I would gladly swap those out and get others.

  7. swalve says:

    I’ll bet the pricing would be nuts. Isn’t HBO $20 a month? That’s what I’d expect for the popular channels.

    Fewer channels per subscriber means fewer advertisers. Less advertising revenue means they’ll have to charge more per channel. I’d imagine it breaks even for most consumers.

  8. dragonpup says:

    Playing Devil’s Advocate for a moment, if all cable went a la carte, it would have a negative effects on smaller niche channels, too. They won’t get as much money, so less original programming, and then a downward spiral.

  9. badlydrawnjeff says:

    @dragonpup: Yup, it’s exactly why I’m not really in favor of it.

  10. stavs says:

    I hate having to pay for the damn spanish channels and religious channels.

  11. JayMo says:

    @dragonpup: I will have to disagree with you, as the advertising model for podcasting is beginning to work, and work well at that for those doing it properly. Take a look at Revision3, or Twit, they are extremely niche, and they make up for it by using niche advertising. Advertisers will pay more if they know that their word is being spread to their target audience instead of the mass public.

  12. thepounder says:

    @stavs: Amen to that. or… Amen a eso (I think)

  13. d0x says:

    I so wish this would happen, I pay more then $50 a month for cable from Comcast, the plan right above basic I believe and I only watch maybe 6 of the 70+ channels but its the only way I can get them!

    Id rather be able to choose and not have my wallet raped every month. The way things are is another reason piracy is so rampant, its cheaper to download just the shows you want to watch and its easy. Maybe if we could choose just the channels we want piracy would drop because bills would drop.

    If this doesnt come to fruition soon im going to switch to DishNetwork who has all the channels I want, plus 40 HD channels for $35 a month with a free DVR. Its not perfect cause im still paying for things I dont need but its a hell of alot cheaper.

  14. philipbarrett says:

    An intersting comparison would be to look at digital C-Band a la carte package pricing [www.allthingsdigital.net] Of course the C-Band owner provides the technical infrastructure themselves (the signals are already up there for distribution to the cable/sat providers. However, I like buying a year of Discovery/TLC/Animal Planet/Travel for $21!

  15. sibertater says:

    Gads. I’ve been saying this for YEARS! I always thought that cable companies would make a fortune for offering only the channels that I wanted and I could stop having to block the shopping channels and the Trinity Broadcast network.

  16. LTS! says:

    @d0x: Where the hell are you getting DishNetwork for $35? The HD package alone costs $20 and it’s only available to the Top 100 customers who have to pay $41.99.

    A la carte does not mean lower pricing for everyone, but it’s certainly a way to go. The reverse problem, using ESPN for a moment, is that let’s say ESPN has 5 channels, ESPN, ESPN2, ESPN Classic, ESPN News, and ESPN U. Let’s say all together they cost the cable company $15/month to carry. Well, let’s say that by breaking them apart Disney decides that ESPN being the most popular should cost $10/month, ESPN2 $5/month, ESPN News $2/month, and ESPN Clsssic and U at $1/month. That’s a total of $19/month for what you used to get at $15. Now, even if you only wanted the first ESPN and ESPN2, you’d be paying $15 for 2 channels when in the package you get 5 channels for the same price. The obvious reasoning here is the same as 2 t-shirts for $10 or $6/ea. It’s engineering profit across multiple channels. So they can take a hit on ESPN because they also make money from ESPNU. If no one orders ESPNU they can’t sell ad dollars and therefore they lose money.

    It ain’t always roses if it sounds to good to be true.. guess what.

  17. sibertater says:

    @d0x: Me too. This I have Brighthouse Networks and it’s the same price. I was just going to get local channels and a DVD burner to get what I wanted but we opted for the whole effin’ shebang.

  18. IndyJaws says:

    “Cable operators have tried to get around tying for years,” says Matt Polka, president of the American Cable Association.

    It was at this point that his nose grew so quickly, it impaled the reporter.

    Polka has been preliminarily charged with Manslaughter, although the local D.A. reserves the right to upgrade to 1st Degree Murder once the microchip in the back of his neck is analyzed.

  19. ShadowFalls says:

    Why can’t cable service be as simple as getting all the local channels for a small cost, then you get tier packs of individual channels of your choosing. This case you can have whatever you want.

    You can have across the board stipulations also, like channel selections can only be changed once every six month period. Only way you could get more channels outside the period is to upgrade to the next tier.

  20. Tristan Smith says:

    I hate paying for all the Spanish channels. I probably get about 10 or so just on basic cable alone!

  21. Nekoincardine says:

    Random idea, in between true ala-carte and the current scheme:
    Cable starts with local broadcast channels, maybe a few channels that one could truly consider part of BASIC cable, plus whatever cable providers are willing to provide for cost-of-transmission only. This would cost, say, the raw costs of providing all the relevent service (calculated per state, and including paying tech support, customer service, and other RELEVENT components (i.e. not executive’s $1million cars)) + $5 a month. I’m willing to bet that, multiplied by the number of customers, this would total out to about $25 a month (an amount plenty of people would find perfectly reasonable).

    Then, offer ‘groups’ of channels for an amount proportionate to the number of channels in the group. Packs should generally favor themes over companies (i.e. an animation pack might include Disney Channel, Toon Disney, Cartoon Network, Boomerang, Anime Network, and the Funimation Channel (I might be forgetting a few here) for $6/month), with occasional exceptions (Isn’t there 20 different ESPNs for different regions? Put those all together in a pack, bars would eat that up.) The more variety of packs the better.

    By putting things in themed groups, costs aren’t quite perfectly ala carte, but any niche that can reasonably fit into a theme with a more popular channel can maintain viewership this way, as long as pack prices remain reasonable in the end result (I’d put average prices at $1/channel + $3 flat per pack per month.)

    To keep things from resulting in uberniche stagnation, however, it might/would probably be worth it for the companies to sponsor ‘free months’ (or weeks?) where their stations are added to everyone’s cable selections, entirely free of charge. This is not only a potentially lucrative form of advertising, but would show love for channel surfer types (such as myself) just looking for stuff to watch late at night or whatever.

    (Random related idea: allow people to pay $5 for a Channel Surfer’s Night, where they can scroll all non-premium, non-PPV content available on that cable network for 12 hours from time of purchase, starting on the next half hour after ordering. Automatically collect anonymized statistics of the results and see what happens.)

  22. Nekoincardine says:

    @Nekoincardine: And yes I realize the “animation pack” price I listed is inconsistent with the suggested rate I put up after that. Then again, for dedicated animation channels as a group I’d personally pay significantly more than that rate, but let’s keep it accessible. :)

  23. Amy Alkon says:

    I’m in Paris right now, where I just saw an ad for a combo plate:

    220 TV channels
    Internet (probably ADSL)
    and unlimited telephone service

    for…19.90 euros. The package used to be about 27 eu!

    Aren’t we supposed to be the competitive, free-market system? Seems…not.

  24. Optimistic Prime says:

    Like seriously, who really watches Scola??

  25. RvLeshrac says:

    [www.allthingsdigital.net]

    This is what the “free market” pricing gets you. Note that the most popular channels are also the most expensive.

    Of course, it makes sense that when you have an infinite supply, you charge more based on demand. Doesn’t it?

  26. RvLeshrac says:

    Oh, I suppose I SHOULD point out that ordering just the C-Band channels you want *is* less than a subscription to cable/sat… but only up to a point.

    If you plan on watching more than ten channels, or want any of the 200-300 channels that aren’t available on C-Band, you really don’t have a choice.

  27. mac-phisto says:

    i don’t know that straight a la carte would be too much of a benefit to consumers b/c cable stations negotiate rates based on their viewership. you might get espn 8 for 50 cents/month, but espn & espn 2 alone will probably set you back $10/month.

    i would like to see a cable system where i buy a basic package & then can buy blocks of additional channels (let’s say 10 channels a clip) & i could pick them & switch them on a month-to-month basis at will. i think what pisses off most customers is when they take a popular channel (like cartoon network or comedy central) & throw it into their second or third pricing tier so mom ends up spending $90/month to keep the kids from screaming.

  28. JustAGuy2 says:

    @Nekoincardine:

    Would actually be a lot more than $25/month. In order for a cable company to break even, assuming that 50% of the homes in its footprint sign up, it needs the average customer to spend somewhere in the ballpark of $55/month ($2k in network costs plus $600 in customer-specific costs * 10% rate of return = $260 in cash flow per year, at a 40% margin, = $650 in revenue, or $54-55/month)

    Executive compensation is a pretty tiny portion of the cost ($1MM cars notwithstanding). At Comcast, for example, if you add up what top dozen or so managers make, it works out to about $0.12-0.15/month/subscriber.

  29. JustAGuy2 says:

    @IndyJaws:

    This is very true. He didn’t say cable operators wanted to go a la carte to consumers, but cable ops (esp. small ones, with limited bandwidth) don’t want to be forced to use up their bandwidth delivering channels nobody actually wants to watch.

  30. Brad2723 says:

    I’d like to see this spread to the satellite industry. As far as channel offerings go, cable and satellite are pretty much the same. Both force you to subscribe to packages.

  31. mantari says:

    I could have sworn that, before DirecTV launched, they were promising a la carte service, but they abandoned the idea. Sadly, I couldn’t find the reference.

    But what I could find was, previously, the National Cable & Telecommunications Association saying how awful a la carte would be [PDF Document].

    Some of the arguments are even now quite silly. “There is no practicable way to provide analog channels on an a la carte basis. Instead, a cable operator would have to duplicate all analog signals in digital.” Which is exactly what major cable operators are doing today.

    Access control would have to be in an expensive set-top cable box, though. Or… newer technology… with a television that has a CableCARD.

    PS: Cox just recently loosened some of their tiering requirements. I was able to drop HBO, the Sports & Info tier, and some weak STARS movie tier. There were all things that I never watched or wanted, but was having to pay for every month. Previously, if I tried to remove them from the bundle, I would lose a discount which would cost me the same amount that I would save.

  32. LoneRider says:

    @JustAGuy2: 40% margin, whoaaa, that is almost Jewelry store margins, no??

    I’m in a group of people that are starting to get really tired of our $65/mnth bills. One guy who had Comcast has already done it, went to “over the air” HD with a series III Tivo lite and NetFlix. We are going to do the same fairly soon, and will probably supplement with some iTunes as well. I will miss some Football, but since some of the college games are going PPV, what’s the point anymore. As it is I am tired of 60 minutes of football taking 3 1/2 hours. I’ve been doing to TV football thing for a couple years (set up Tivo to tape game + 1hour, start watching an hour+ into it) I would like to go to Myth TV and save more on the subscription, but I don’t have the time for the extra system admin that I believe would be required.

    Sadly though, I don’t think the advertising model is breaking quickly enough in the masses. It is breaking with some people, like many of us here, but we are the minority, sadly. Hell, I’m still somewhat embarrassed to admit I only got a 20 year mortgage on my under bought house, so I could live debt free before my daughter goes to college.

  33. savvy9999 says:

    As a part of alc, I would like to also see a way whereby consumers can not only pick the channels they want, but also can place them in their own ‘sequence’ on their own TV/cable box. If I’m getting 20 basic stations and paying for an additional 5 on a sports tier + HBO, it would be great if I could put HBO on channel 1 if I like, then ESPN on 2, then NBC on 3, then ESPN2 on 4, you get the idea.

    In the digital age, this should be just a simple software mapping inside the box. I can see how this would be rather clunky with 300 channels, but with only 20 or 30, this shouldn’t be hard to implement.

    Obviously, cable/sat operators aren’t watching (or listening) to what is and has been devoured by consumers over the past, oh, decade. Quality, on-demand, customizable, and entirely self-organizable content.

    Even freakin’ Burger King figured out that ‘Have It Your Way’ works, but Comcast and TimeWarner have not. First content provider to wake up in the 21st century wins!

  34. Anitra says:

    I would love some sort of a la carte system for our house, whether it was narrowly-defined “tiers” or single-channel picking. We watch ONE sports channel (regional, not ESPN), plus Nickelodeon (gotta have Nick at Nite), USA, and a couple of the educational channels. Less than 10 channels, all together. But we’re paying for the full digital/HD package (we really only want HD for sports).

    I’d even pay $5/channel, if it came to that. It’s got to be cheaper than what we’re paying now.

  35. Saboth says:

    JustAGuy: I have no problem spending $50-$55 a month for cable. The problem is, I am paying that currently (our lowest tier of basic cable from Comcast) and only watch 10% of the channels. I don’t want the sports, home shopping, religious, spanish…well I don’t want most of it. I will gladly pay $50 a month for 20-30 channels I actually want to watch. As is, I feel ripped off because I am paying for something I don’t want, just for 4-5 channels I do watch.

  36. umbriago says:

    I was sick of paying $67/month and watching a less than a dozen channels. So I:

    Welcomed Netflix into my home.

    Turned a computer into a media box – able to rip DVDs for future viewing, for Usenet content, etc.

    Got a decent HD antenna.

    Said “Good widdance to bad wubbish,” as Elmer Fudd used to say, and am ending my long relationship with Cable Television this weekend.

  37. JMH says:

    @Amy Alkon: I’m no expert, but I have to figure there’s some government subsidy or regulation that’s keeping the price as low as you mentioned.

    Which isn’t to say that the idea of competition for cable customers here in the U.S. is anything more than a myth, of course.

  38. Dibbler says:

    I was told by a guy at my cable company (Cox) that ESPN is responsible for half my bill each month. He said they are just raping the cable companies for their channel. If I dropped them since I rarely watch them anyway I could save a bunch. Right now “basic cable” in my area is up to $43 a month. That’s 70 channels of which I usually watch about 8. I would love it so much if ESPN could be knocked down a few notches… ;)

  39. philipbarrett says:

    @RvLeshrac:
    Every channel is available on C-Band/KU, how else would the cable networks & sat providers derive their signals?

  40. Geekybiker says:

    You know ala carte wont result in reduced prices for most consumers. Cable ops are sure to set the pricing such that the average consumer ends up pretty much the same. What it will do is really hurt small networks like speed, or whatever specialty channel you’re into. I think it’ll work either one of two ways. 1) They rape you for the channels “everyone” wants. That way they are sure to maintain a minimum price. 2) They introduce some network fee, and have relatively flat pricing based on what the network actually charges them to be carried.

  41. forever_knight says:

    @Dibbler: espn is pricey (compared to other channels), but it isn’t responsible for half your bill. if i recall correctly, it’s something like $2-3 at most. it’s no HBO pricing.

  42. pureobscure says:

    I would pay more to not have certain channels. I would love knowing that none of my money was going to garbage channels like ‘E’ or ‘MTV.’ And I could absolutely live without ESPN.

  43. BrockBrockman says:

    I would rather pay $60/month on 30 channels I watch regularly than 100 I don’t. Of course, I should be able to pick from a slew of channels that aren’t being provided to me now.

  44. Ghede says:

    So thats why we had to remove (To steal and butcher a joke from Dennis Miller) “What’s left of western civilization” channel for ESPN8.

  45. BrockBrockman says:

    @Ghede: ESPN 8 ? El Ocho !!!

  46. RvLeshrac says:

    @philipbarrett:

    It isn’t as much “Not available on C-Band” as it is “Not available to *YOU* on C-Band.”

  47. JustAGuy2 says:

    @LoneRider:

    40% may seem good, but that doesn’t take into account the capital investment.

    Think of it this way: gas costs as a % of a taxi fare are pretty small, but if you ignore the cost of buying and maintaining the taxi, you’ll think that being a cab driver is a lot more profitable than it actually is.