Capitol Hill Chews Over A La Carte

Author:
Publish date:

A generation ago, the saying was that a conservative is a liberal who just got mugged.

Today, a liberal is a conservative who wants to mug the cable TV industry.

You don’t have to win $1 million on Jeopardy to realize that a powerful, conservative-led coalition that wants to do battle with the cable industry over consumer rates and indecent programming is brewing in Congress.

The coalition includes Republicans and a few iffy Democrats in varying degrees of intensity. Some care about rates, some about indecent programming, and some about both. But the coalition’s strength is clearly derived from conservatives who are making threats normally associated with market interventionists found on the far left.

PRESSURE’S ON

Cable foes allege that a dysfunctional programming-acquisition market is driving cable rates higher, while others resent that many operators insist on bundling cartoons with programming that they say celebrates cultural rot. These lawmakers, their concerns sometimes expressed in bold terms, are putting tremendous pressure on cable to respond.

At a hearing in the House Subcommittee on Telecommunications and the Internet last Wednesday, all the anxieties about the current pay-TV market were on full display, with cable’s most ardent foes giving fair warning that if the industry failed to give subscribers more control over the programming they purchase, it would be inviting trouble.

Almost every point of view was expressed, covering a rocky landscape that included consumer rates; the needs of programmers new and old; the nitty-gritty of cable-programmer negotiations; indecency; antitrust law; and a la carte in Canada.

A key turning point in the debate could be the release of an a la carte study currently being conducted by the Federal Communications Commission. The report is due in Congress by Nov. 18, about two weeks after the fall elections. Last October, the General Accounting Office issued a report that disappointed many la carte advocates, including Senate Commerce Committee chairman John McCain (R-Ariz.)

DEAL NAILS VIACOM

At the House hearing, Rep. Nathan Deal (R-Ga.) attacked the major broadcast networks for tying access to their local TV stations to carriage of numerous cable networks in their stables, and for demanding expanded basic-cable carriage for all of them, regardless of whether that programming is appropriate for children.

Deal accused Viacom Inc., owner of the CBS broadcast network and numerous cable channels, of being one of the worst offenders.

“If your child wants to watch SpongeBob SquarePants, a child’s program, they must also buy [MTV’s] Undressed or [Spike TV’s] Stripperella, two highly sexual adult programs,” Deal fumed. “If this, as a business philosophy, is applied everywhere, candy stores would be required to sell marijuana.”

Deal also complained that Viacom was attempting to gain expanded basic carriage of “LOGO, a gay and lesbian channel” almost immediately after a contrite Viacom lamented Janet Jackson’s breast exposure during the Super Bowl halftime show seen nationally on CBS.

Viacom reacted instantly.

“We strongly object to the outrageous characterizations of MTV Networks’ business practices and programming at today’s congressional hearings. They distorted the truth and were obviously designed to mislead consumers. No distributor is required to take all of our services,” said Viacom spokeswoman Jeanine Smartt.

Cable industry reprehensive sent to testify stood their ground. Time Warner Cable president Tom Baxter, Hallmark Channel CEO Paul Fitzpatrick and TV One chairman Alfred Liggins all told the committee that forced a la carte would hurt consumers, hurt programmers, and do violence to a business model that has nutured more than 300 networks into being and stands as a free-market paragon of programming choice and diversity.

“In short,” said Liggins, who is trying to grow a new channel aimed at African-American adults, “[a la carte] would have a devastating effect. It would be the death knell for many new service offerings.”

Baxter added that a la carte “may seem seductive but going down that path is unnecessary and will ultimately lead to higher prices for consumers.”

Deal has proposed legislation, since withdrawn, that would permit, but not obligate, pay-TV distributors to retail cable networks outside expanded basic in an effort to destroy the bundling power of programmers like Viacom, The Walt Disney Co., NBC Universal and News Corp.

Deal has stated that the big networks might have to worry that antitrust law could be amended in such way as to outlaw bundling.

Deal’s approach is supported by the American Cable Association, a consortium of small cable companies that has fought the major networks for years over their bundling practices. The big networks won the right to bundle in retransmission consent rights in the 1992 Cable Act.

HOOKS: GIVE CHOICE

“Forced bundling must be eliminated if choice is ever to be granted to consumers,” Ben Hooks, CEO of Buford Media Group, a cable company with 56,000 subscribers, said in his House testimony.

ACA has few allies within the cable industry. But a competitor — EchoStar Communications Corp., the No. 2 direct broadcast satellite carrier with 10 million subscribers, which just had a bruising bundling fight with Viacom — is backing Deal.

“As you have correctly observed, the restrictions programming vendors impose on video distributors like EchoStar ultimately make it more difficult and costly to simply offer consumers the channels they wish to view, which forces many consumers to underwrite programming they find objectionable or undesirable,” EchoStar chairman and CEO Charlie Ergen said in a July 14 letter to Deal.

ACA’s bundling argument was countered by Ben Pyne, executive vice president of Disney and ESPN affiliate sales and marketing.

PYNE: OPS WON’T PAY

Pyne noted that after passage of the 1992 Cable Act, cable companies refused to pay cash for broadcast signals. In a compromise, he said the two sides agreed that cable carriage of ABC-launched cable networks would suffice as compensation for retransmission consent.

Pyne said that contrary to ACA’s claims, Disney has a standing offer to cable operators that the company’s 10 ABC owned-and-operated stations may be purchased separately for about 80 cents per month, per subscriber, a price he said that reflected the $3.1 billion ABC spends on programming annually.

“Let me make very clear for the record that we at ABC offer cable operators a stand-alone cash deal for ABC retransmission consent,” Pyne said. “It’s just that they don’t want to pay anything for broadcast programming.”

Pyne also addressed cable indecency, stating Disney’s position publicly for the first time. He said broadcasting and expanded basic-cable networks should be subject to uniform indecency standards. Today, the FCC fines TV and radio stations, but not operators, for airing indecent programming between 6 a.m. and 10 p.m.

House Energy and Commerce Committee chairman Joe Barton (R-Texas), who believes cable programming will someday be regulated for indecency like broadcasting, tossed his support behind greater consumer choice.

“I believe cable and satellite programmers should give consumers more options. I believe that parents and families should have more opportunities to choose family-friendly programming, and block channels that sometimes carry indecent programming.”

Deal has friends on the right. Rep. Chris Cox (R-Calif.) said consumers deserved “maxium choice” and “an opt-in, rather than an opt-out, system for indecent programming.”

Cox was apparently taking issue with the National Cable & Telecommunications Association’s plan to give consumers free technology to block programming that they have paid for but that they don’t want in their homes.

Rep. Cliff Stearns (R-Fl.) called on the industry to conduct a trial that would test all the theories about a la carte.

“I don’t think anybody on this committee would object to a demonstration model,” Stearns said.

CANADA HAS OPTIONS

Janet LaRue, chief counsel for 500,000-member conservative watchdog group Concerned Women for America, said MSOs were force-feeding objectionable programming to consumers. Canadian cable customers, she said, have more options.

“In Canada, there is a la carte channel selection offered on several of the largest cable systems and subscribers save about 30% compared to subscribers who select the average number of channels Americans tend to watch,” LaRue said.

Cable has at least one strong Republican ally in subcommittee chairman Fred Upton (R-Mich.), who said he was unlikely to support any kind of a la carte mandate.

The status quo, he said, is serving the country well. “The current business model upon which video programming and distribution relies has evolved over many years and has brought enormous benefits to the consumer.”

Related