FCC Study Supports Case for A La Carte

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Washington— The Federal Communications Commission released a study last Thursday stating that the a la carte sale of cable programming — an approach fiercely opposed by the industry — could provide “substantial benefits” to consumers.

FCC chairman Kevin Martin, an a la carte proponent, telegraphed the report’s major findings in Senate testimony last November, claiming that a similar agency report in November 2004 prepared by staff working for then-chairman Michael Powell was flawed because it relied on a cable-funded study that had analytical and mathematical errors.

Cable has claimed that the per-channel sale of networks — as opposed to the sale of dozens of channels in tiers, the current business model — would drive niche networks from the market and force surviving channels to charge much higher retail fees to replace lost ad revenue, so that consumers end up paying more for less.

The National Cable & Telecommunications Association funded a study by Booz Allen Hamilton Inc. to document the economic havoc that forced a la carte would unleash — a report the FCC’s first a la carte study largely embraced. But the record on a la carte presented to the commission was massive and included other economic studies, not just Booz Allen’s findings.

At Martin’s direction, FCC staff picked apart the cable-funded Booz Allen report and determined the consultancy committed analytical and mathematical errors which masked findings that a la carte could benefit consumers. In a statement, Booz Allen Hamilton said it stood by its conclusions.

NCTA president Kyle McSlarrow dismissed the FCC report: “The notion that the government knows better how to improve on a competitive marketplace is not supported by the evidence.”

In the report, the FCC said Booz Allen failed to “net out the cost of broadcast stations when calculating the average cost per cable channel under a la carte.” This omission overstated prices by 50%, the FCC added.

The commission also said the report underestimated the number of channels a consumer could purchase a la carte without seeing an increase in his or her monthly bill. The FCC said the correct channel count was 20, three more than the 17 channels a typical household views. Under certain scenarios, the FCC found that buying 20 channels a la carte could lower monthly bills 3% to 13%.

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