Policy

Marx: Let Viewers Pick

5/12/2006 8:00 PM Eastern

Washington— Parents should have the right to buy only those cable channels they deem appropriate for their families in an a la carte selection process that would promote consumer choice and competition among pay TV distributors, a Federal Communications Commission official appointed by chairman Kevin Martin said last Wednesday.

“Why should you have to pay for channels that you are blocking?” FCC chief economist Leslie Marx said in remarks here at the Cato Institute, a libertarian think tank. “The FCC has looked into the issue of providing consumers with more choice and has found that a la carte and other means for increasing consumer choice could benefit consumers.”

Marx — addressing a small audience on TV indecency with former Motion Picture Association of America president Jack Valenti — said the a la carte sale of cable networks is a market reality in several mature economies around the globe.

'WOULD BE SUCCESSFUL’

She cited Hong Kong, where the introduction of a la carte in recent years by one telephone-based video provider, PCCW Ltd. [NOW TV], has forced incumbent cable provider I-Cable Communications Ltd. to respond competitively by slashing tier prices. Hong Kong consumers who take the a la carte option pay 50% less than those who buy programming tiers, she said.

“All programming competes in the free market, and diverse programming selections have remained,” Marx added. “There is every reason to believe that a la carte offerings would be equally, if not more, successful here in the United States.”

At least twice, Marx suggested that “the FCC” has endorsed cable a la carte. In fact, the agency under Martin issued a report in February saying that a la carte could lower cable bills under certain scenarios, but the report was not endorsed by an FCC majority.

The Martin report, largely drafted by Marx, reversed findings of a November 2004 a la carte study released by the FCC, which was then under former chairman Michael Powell. That report was not blessed by an FCC majority, either.

“She did not tell you that in the previous FCC administration under Michael Powell, an economic survey was done that said a la carte would be too expensive,” Valenti said. “In other words, if you don’t like what one doctor tells you, heck, go to another one, you might get a better deal.”

Marx, saying she had an appointment, left the dais after refusing to take questions from the audience, which also included Powell’s former Media Bureau chief, Ken Ferree, who supervised the FCC study that dismissed the notion of a la carte as a cable consumer panacea.

Marx, an economist on leave from Duke University’s Fuqua School of Business, joined the FCC last August. Her unvarnished support for a la carte went well beyond Martin’s personal observations on the subject, which are usually tied to parental empowerment over cable channels that include indecent content.

Martin has said that a la carte is one of several options. Cable operators could roll out family tiers, as major cable companies are currently doing, or ensure that programming tiers do not include indecent content between 6 a.m. and 10 p.m. — the “safe harbor” hours when indecency is banned on radio and broadcast television.

“The cable industry has already begun. Comcast [Corp.], Time Warner [Cable] have family tiers out there now. You may object to it,” Valenti said, motioning to Marx.

A Comcast spokeswoman said family tiers are available in mostly all of its digital-capable markets. A Time Warner spokesman said they are available throughout the operator’s divisions, but it was too early to offer subscriber counts.

CITES CONSUMER CHOICE

In her comments, Marx took strong issue with the cable industry’s tradition of selling dozens of channels in tiers and requiring parents to rely on digital set-top boxes to interdict programming they don’t want their children to view.

“The FCC agrees that parental choice and control is critically important, but to really give parents the choice and control they need, allow them to purchase only those channels they regard as appropriate for their families,” Marx said. “Allow consumer choice to be the factor that regulates programming content in the cable industry.”

Some cable operators, including Cablevision Systems Corp., have advocated an a la carte model. But Cablevision won’t offer its affiliated channels a la carte, claiming that it wants to wait for the entire industry to embrace the concept.

The National Cable & Telecommunications Association has argued that government-mandated a la carte would raise monthly prices and diminish choice by killing off lightly viewed niche channels — a conclusion shared in the FCC report under Powell.

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