Broadband or TV?

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Readily available broadband Internet
service has been a national priority for the current
Federal Communications Commission. But
is help for accessing low-cost
TV just as important?

As part of the overall economic-
stimulus package, the
Obama administration set
aside about $7 billion to assist
in extending high-speed
Internet access to rural and
needy communities, and the
FCC made it a condition of approving
Comcast’s $30 billion
NBCUniversal joint venture.

So Comcast launched its
Internet Essentials program,
offering broadband service
for $9.95 per month — and a
voucher for a low-cost computer
— to families across
its footprint with at least one
school-age child participating
in the federal school lunch program. Earlier
in November, other cable operators such as
Time Warner Cable and Cox Communications
announced plans to roll out similar initiatives.

But some critics have said other poor families
can’t afford computers, let alone broadband access
— which is why several federal programs
included buying computers for low-income families
or extending broadband access to libraries
and other public institutions. But television, already
found in about 87% of U.S. homes, or some
101.2 million domiciles — and arguably the main
source of news and information for poorer communities
— is left in the lurch.

While poor families can still get their news
and information from local broadcast stations
over the air for free, in some areas reception is
poor, and that limits choices. And particularly
during busy news cycles, a growing number of
Americans are getting their information from cable
channels like CNN, MSNBC, Fox News Channel
and others.

Mediacom Communications
group vice president of
government and public affairs
Thomas Larsen said that the
government should get more
involved in making affordable
video available to poorer
families. While stopping short
of asking for subsidies, Larsen
said that by keeping programming
costs in check, the
government can assure that
its citizens have full access to
news and information at a reasonable
price.

TV IS EVERYWHERE

“The FCC has really focused on
making sure low-income people
have access to cheap Internet,
but they are not focused at all on access to
cheap television,” Larsen said. “So few people
have a computer in the lower income brackets,
but everybody has a TV. Why aren’t we focused
on getting an entry-level video package that is affordable?”

Mediacom operates mainly in more rural secondary
markets, where over-the-air reception
isn’t always an option. And because of high retransmission-
consent costs, the per-month price
broadcast basic service for a typical Mediacom
customer is in the mid-$20s.

Mediacom is one of several cable, satellite and
telco operators that have banded together to lobby
for changes to the FCC’s retransmission-consent
rules. So far, the agency has sent out a notice
of proposed rulemaking and scheduled hearings, but is no closer to making a decision.

Larsen said that the FCC doesn’t have to subsidize video,
but making it an integral part of policy, much as it has done
with broadband, could go a long way.

“The broadband plan is not law; it’s not regulation,” Larsen
said. “That is getting companies to voluntarily commit to
doing something, saying that this is good for society, let’s do
it. Why not talk about video in the same context?”

“I don’t have the magic answer,” he added. “But if someone
doesn’t come up with an answer soon, it’s going to be bad
for all of us.”

National Cable & Telecommunications
president and CEO Michael Powell, a former
head of the FCC, said that he knows
of no initiatives to boost video adoption
among poorer families.

“This FCC has been almost exclusively
focused on broadband being the 21st-century
communications architecture,” Powell
said. “The things they have chosen to
focus on are heavily focused on that part of
the bundle. There is a relatively strong view
that the Internet shall provide, and that the
Internet provides an enormous amount of
value from a content, information and entertainment
perspective that we once relied
exclusively on in a closed regulatory
architecture. I think it is more a question of
free over-the-air TV. The commission also
is trying to take spectrum away for a more
important purpose — broadband.”

Cable operators have raced to market in recent months
with lower-cost tiers aimed at making TV affordable for more
price conscious-customers.

“I don’t get the sense that any of [the economy TV packages]
have hit the sweet spot yet,” Sanford Bernstein cable and
satellite analyst Craig Moffett said. “They all tend to be relatively
expensive and the price-value proposition is, at least
on the surface, not terribly compelling.”

For its part, Time Warner Cable charges $29.99 monthly,
but values its TV Essentials package at about $49.99 per
month, including 12 of the top 20 Nielsen-rated cable channels,
representing major genres like kids, news and information,
lifestyle and sports, as well as its popular “Start Over”
and “Look Back” services.

According to some operators, the economy packages highlight
the intrinsic value of their higher-priced tiers. Time
Warner Cable chief marketing officer Jeff Hirsch said in a recent
interview that many people who call to inquire about
its TV Essentials package end up taking a higher priced tier.

“The key is to continue to refi ne the products and services
we have, whether it’s TV Essentials, Signature Home or El Paquetazo,”
Hirsch said. “At the end of the day, we need to have
the right sets of content to get people to continue to buy from
Time Warner Cable.”

COMCAST’S ADD-ONS

Comcast has taken a different tack with
its MyTV Choice package, currently being
tested in Connecticut, Charleston, S.C.,
and Seattle. The nation’s largest MSO has
opted to create a core package of broadcast
stations and 39 cable channels sold
for $24.95 per month. Customers may then
buy additional channels in several different
genres (Sports, News & Information,
Entertainment & Lifestyle, Movies and
Kids) for an additional $10 per month.

At Charter Communications, the emphasis
has been more on retention and new
customers with its Charter Starter package,
said spokeswoman Anita Lamont. Charter
Starter is a low-cost triple play of baselevel
video, Internet and phone for $80 per
month, or base-level video and Internet for
$65 per month. Customers are required to
make a pre-payment for the first month of
service plus an install fee and as they develop a payment history,
other services like faster data speeds, digital video tiers
and enhanced features are unlocked.

Other operators, such as Mediacom Communications and
Cox Communications are experimenting with different packaging
options, but have not yet rolled out a formal economy
package.

For their part, the FCC and legislators have decided to focus
on broadband because that’s where they feel the market
is ultimately moving. The agency’s AllVid proposal, which
would wed broadband, broadcast, cable and satellite in a TV
set-top device as a spur to broadband deployment and adoption,
has been opposed by other larger multichannel video
service providers like Comcast, Time Warner Cable, Direc-
TV, Verizon and AT&T, who claim that the industry already
is moving in the right direction without another government
mandate.

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