Policy

ACA: Big-Media Bundling Raises Rates

10/20/2004 10:09 AM Eastern

Small cable operators are continuing to complain to federal regulators that media conglomerates are using their leverage to reach programming-carriage deals that squeeze out independent programmers and cause cable rates to rise.

These points were driven home Tuesday by the American Cable Association in a letter filed with the Federal Communications Commission to counter arguments made by Viacom Inc. that cable operators are free to buy any of its networks on a stand-alone basis and are not compelled to buy Viacom’s entire family of services on a take-it-or leave-it basis.

The ACA -- which represents 1,000 cable companies with more than 8 million subscribers -- said the issue was not whether the networks were made available on a stand-alone basis, but whether the stand-alone offering was economically realistic.

The trade group cited several examples, but it did not name the programmer due to nondisclosure requirements. In the past, the group has pointed a finger at the “Big Five” -- Time Warner Inc. and the corporate parents of ABC, CBS, NBC and Fox.

The ACA said the big programmers’ tactic was to use pricing strategies that ensured carriage of the bundle.

In one example, the ACA said, one unnamed programming giant offered a bundle at a per-channel price that would rise by 295% if only one service from the bundle were purchased individually. The trade group called this the “Choose one, triple your cost” option.

“For smaller cable companies, this presents no meaningful choice. They must buy the bundle,” ACA outside counsel Christopher Cinnamon explained.

Cinnamon also documented another practice he labeled “buy less, pay more.” In this example, if a cable operator buys a few services in a bundle but not the entire bundle offered, the price of the smaller bundle can exceed the price of the larger bundle by 20%.

The ACA told the FCC that these wholesale offerings meant that small cable companies were forced to buy more programming than they wanted, and having to do so raised cable rates. Carriage of big bundles, the trade group added, also took up capacity that small operators wanted to earmark for independent programmers.

“[FCC] scrutiny of whole programming practices will expose a variety of similar coercive pricing schemes,” Cinnamon wrote.

September