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TV à la Carte? I'll Take the Buffet

by Hilda L. Solis

In 2002, arch-conservative civic groups joined with consumer groups to fight the Federal Communications Commission-proposed "media concentration" rules that would have given large media companies the right to gobble up local print and television outlets. It was a watershed moment -- the kind of left-right consensus rarely seen but fused together over the populist issue of diversity in media.

Today, the issue of media concentration is again at the center of a controversial proposal by the FCC that would change how 90 million consumers watch television. The idea is per-channel-charges -- or in the more sanitized lexicon known as à la carte pricing for the cable industry -- federal rules which would allow consumers to purchase cable channels on a per-channel basis.

Per-channel charges certainly have some superficial appeal. One consumer group has argued that it would help consumers curb cable costs. Self-described media critic Brent Bozell has said that per-channel-charges would help sift out what he sees as objectionable programming -- like MTV. The FCC even included à la carte as a potential solution in its recent report on TV violence. At the national cable TV show in Las Vegas last week, FCC Chairman Kevin J. Martin defied what now appears to be a broad congressional consensus on the matter and again advocated per-channel charge regulations.

But a close look at the idea of à la carte pricing shows that it would be a disaster for consumers. Most consumers would pay more for less, as the sweeping rules would decimate small and niche cable channels while raising prices.

Nearly every study on the matter has shown that the buffet approach gives consumers a far better shake than the à la carte approach. (Go to www.diversityTV.org.)

Here's why.

Cable's expanded basic tier of programming -- the common platform, or bundle, of channels to which most cable customers subscribe -- is built on the simple economic principle of "economies of scale." When a small or emerging network -- say Galavision or Oxygen for example -- becomes part of the common platform there are vastly reduced costs, and thus savings that are ultimately passed on to consumers.

For starters, once on the platform, a new network is immediately exposed to millions of viewers who will stumble across it as they surf for the channels they regularly watch. Indeed, many networks such as ESPN and the Discovery Channel are taken for granted today. But these and hundreds of other cable channels say that new programming will never get off the ground in an à la carte world.

Second, small-and-medium-size programmers get premium advertising dollars due to their placement on the expanded tier, because advertisers know their "potential" audience -- of both surfers and new converts -- is much larger than if a new network had to attract new viewers on its own.

The common platform, then, is a new channel's introduction to the television viewing world, and the key economic system for containing its costs. And these benefits translate to consumers who have an ever-increasing thirst for more products and who want to control prices.

According to FCC data, the number of cable channels on extended basic has increased by 6 percent, while the price -- on a per channel basis -- has, as a major trade publication recently reported, actually declined. That's precisely because of the economies that the "shared platform" brings.

Indeed, virtually every study by private firms and government agencies -- including an earlier, more comprehensive study by the FCC -- have concluded that à la carte will raise prices for consumers who watch more than 11 channels, and kill small, minority, women and niche programmers. In particular, the earlier FCC report found that the "loss of cost savings, combined with the loss in advertising revenue and the likely rise in license fees to compensate such losses, may cause many program networks to fail, thus adversely affecting diversity."

But, in an apparent misstep into the mare's nest of the media concentration debacle of 2002, the FCC seemed to recklessly flip-flop its position on this, instead egging on à la carte as a regulation that would, accordingly to its 2005 "Further Report," "weed out" smaller networks and "shift value" to the big established networks. Advocating à la carte as a solution to violence on TV is likewise misguided: by placing niche programmers at risk, the FCC will ironically rob consumers of the very family-oriented content it hopes to promote.

The fact of the matter is this: nearly every study, nearly every major civic group on the political right and left, and nearly every cable programmer who lives in the competitive trenches all have said that à la carte pricing is a bad deal for consumers and a poison pill for the cause of media diversity.

When it comes to cable programming, I'll take the buffet approach over à la carte. On numerous occasions, Congress has made it clear to the FCC and the public its view, to quote old adage, that "if it ain't broke, don't fix it." The chief federal communications' agency out not to be tone deaf to this message.

Hilda L. Solis represents California's 32nd Congressional District in the U.S. House of Representatives and is a member of the House Committee on Energy and Commerce.

© 2007 Hearst Communications Inc.

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