FCC's Top Economist Trumpets a la Carte - Multichannel

FCC's Top Economist Trumpets a la Carte

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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 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.

In Hong Kong, for example, she said, the introduction of a la carte in recent years by one cable company has forced the second cable company to respond competitively by slashing tier prices. Hong Kong consumers who go a la carte pay 50% less than those who buy programming tiers.

“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 noted. “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 a la carte as a cable consumer panacea.

Marx, a PhD 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 option, noting that cable operators could roll out family tiers, as major cable companies are doing, or ensure that programming tiers do not include indecent content between 6 a.m.-10 p.m. -- the same 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 up 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 MSO’s divisions, but it was too early to offer subscriber counts.

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 reduce choice by killing off lightly viewed niche channels -- a conclusion shared in the FCC report under Powell.

In her comments, Marx indicated that parents who block cable channels on a tier deserve refunds, pointing to rebates that Sport Illustrated offers to subscribers who do not want the annual swimsuit issue, which is controversial with some family and feminist organizations because the pages are splashed with photos of supermodels in revealing bikinis.

“If you are not interested in receiving their swimsuit issue, you can call them up and they will not send it to you,” Marx said. “You can have it blocked, but your bill will be credited for the value of the issue. You will be reimbursed for the issue you do not receive.”

Time Warner Inc. owns both SI and Time Warner Cable, the second-largest cable operator in the United States.

Marx also suggested that consumers for whom English is a second language are disserved by cable’s tiering system. She pointed to Spanish-speaking cable consumers who must buy two (presumably English-language) programming tiers before they can buy an all-Spanish tier.

“Why should Spanish-speaking consumers be forced to pay for and subsidize channels they don’t watch in order to get the channels they value?” she added.

The remedy for consumers, she said, is picking channels one-by-one.

“If you want to empower parents, really empower them, if you want to enable them to avoid watching television that they don’t want, then allow them to choose the channel that they want to watch and not pay for the channels that they don’t want to watch,” she added.

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