Forum: Peeking Behind the Veil of Choice


There is an ancient Chinese proverb that states: "Becareful what you wish for because you just might get it."

Reps. [Billy] Tauzin and [Edward] Markey should carefullyconsider this wise advice as they contemplate the creation of new requirements for tieredservice offerings of cable TV. Their notion to force operators to offer a "broadcastbasic" tier is fraught with perils that they may not have considered.

In order to offer choice, program signals must becontrolled so that they reach only those homes that request them. There are a limitednumber of ways to create tiers and restrict viewing of channels on a broadband system.

The unwanted channels must either be trapped outside thehome with a physical device or scrambled at the headend and later unscrambled inside thehome. Here is my examination of the options.

Create a tier of adjacent channels and trap the rest.

The first, and easiest, method of tier creation is to packthe channels of a particular tier together and install a trap to eliminate the rest.Unfortunately, this will not work in many cable systems.

The much coveted V-band channels are no longer theexclusive domain of broadcast channels. Many systems offer a mixture of broadcast andsatellite services on channels 2 to 13. Broadcast signals are scattered throughout thespectrum. Before operators can create a tier composed entirely of broadcast signals all onadjacent channels, Congress must make significant changes to the must-carry andretransmission consent rules we currently "enjoy."

I cannot move broadcast signals to new channel positions atwill. I am bound by must-carry and retransmission [consent] requirements. I doubt thatCongress is willing to grant me the right to make unilateral changes. I am sure thebroadcaster would oppose such an idea.

This option creates a requirement to move satellite signalsas well. They will not take kindly to the notion of unilateral contract changes when theirchannel is replaced by a broadcast signal. Subscribers also face higher fees for cablenetworks, as V-band discounts are lost.

We should not forget the viewer in all of this.Long-established viewing patterns will be disrupted by such a change. Consider theadvertisers as well. Local merchants have invested heavily to create a presence on cablenetworks. Wholesale changes to lineups disturb their significant investment.

An additional consideration is the fact that traps employedto remove all but the broadcast tier would be of the negative variety. These are highlysusceptible to theft and failure. Such a system requires constant audits and theaccompanying expense to subscribers.

Create special traps to accommodate current channelpositions.

If Congress is unwilling to change the must-carry andretransmission [consent] rules, it is technically possible to build special, custom"traps" that will allow the channels to stay where they are now located.However, these traps are very expensive, quite large, require outside electrical power andare susceptible to consumer theft.

These traps are actually a series of notch filters thateliminate the unwanted channels either individually or in adjacent groups. The fact thatmany small traps are used creates both the high cost (in excess of $300) and the largesize (about the size of three shoeboxes). The multiple filters also result in signaldegradation, so an amplifier must be included in the package requiring electricity fromthe subscriber's home.

The large size of the filter cabinet would severely limitthe installation options for this device, and many people (particularly apartment owners)would object to the presence of a large "box" on the side of their building. Youcan't place the box on the pole because it would interfere with the "climbingspace."

How would the cost of this trap be treated in the pricingstructure? Surely, the consumer should pay the cost of the trap. However, the $300 pricetag amortized over the life of the device would increase the cost of "broadcastbasic" to an unacceptable level. Finally, since it would be a negative trap system,it could easily be defeated.

Use an advanced converter with a 'channel map.'

This is a distant possibility. An advanced converter can beprogrammed to pass only certain channels, but, once again, certain problems arise. First,customers don't like "boxes." The people who desire broadcast-only channelswant minimal service for financial reasons or are installing a satellite dish. Theydon't want to install a tower or antenna. They don't want to contend withanother "box" and remote either.

Second, advanced converters are expensive. The requirementthat one be installed will certainly increase the cost of a broadcast basic tier, perhapsto the point where it saves very little.

Finally, this method is also very susceptible to theft. Weutilized this method for a time and found, upon a complete audit, that 60 percent ofsubscribers had removed the converter -- by destroying the anti-theft shields -- to enjoyfull service without paying for it.

Scramble everything above broadcast basic.

This is the ultimate option. It seems intuitive thateveryone would like this concept. Buy and pay for only what you want to watch. However,there is overwhelming evidence to show that consumers reject such an arrangement.

In 1993, the cable system that serves the community next toours initiated a program to do exactly this They spent over a year in very difficult andtime-consuming negotiations with program suppliers (who fought the idea every step of theway). When they finally finished, they changed their entire program lineup so that allservices beyond broadcast signals were available on either an individual basis or insmall, genre-based packages. Prices varied based upon the size of the package and thewholesale cost of the programming. Everything above the broadcast tier was scrambled.

People absolutely hated it. The outcry against this conceptwas so strong that public hearings were held in virtually every community served.Consumers and city officials universally condemned it. The public rejection of the conceptwas due to the fact that an addressable converter box was required for every TV set,regardless of how many or how few services are chosen. The vast majority of people feltthat the added expense and perceived inconvenience was not worth the savings that resultedfrom eliminating program services.

An ironic twist is the fact that the Cable Act eliminatedor greatly reduced charges for additional outlets. Consumers very quickly increased thenumber of TV sets connected to their cable system. It became very common to find four ormore sets connected inside a house. People enjoyed this convenience. Imagine theirsurprise and outrage when they were told they must install a converter box on every TV setin their home and pay an extra montlyh fee just so they could continue to enjoy theprograms they already received.

It is impossible to separate some type of equipmentrequirement from scrambling. It is also impossible to limit the equipment requirement toonly those people who want the limited service of a broadcast basic tier. If only oneperson chooses broadcast basic, everyone else must install a converter on every set inorder to accommodate that choice.

An additional consideration for this option is theconverter requirements that will become effective in 2002 and 2005. How can we possiblyundertake significant investments in converters to control basic cable programming now ifwe must eliminate the converters within a few years?

Imagine the logistics of equipping every single set inevery single home (except the 2 percent who want broadcast only) with new addressableconverters. Imagine the cost of these boxes on an accelerated depreciation schedulebecause they must be "phased out" to meet new federal requirements in a fewyears. Imagine the confusion as consumers buy and install their own converters and add anas-yet-undeveloped "pod." All so 2 percent of cable viewers can gain access tobroadcast signals that are, by federal regulation, available to all homes within thebroadcast market.

The television broadcast industry has an obligation toprovide adequate signal to homes in their market. Over the past few decades, they haveabdicated that responsibility. They have relied upon cable systems to deliver their signalto fringe customers. Perhaps Congress should look to the broadcasters to deliver their ownsignal via the medium they have chosen to champion so long and loud instead of forcingadditional equipment and expense upon all cable consumers.

Robert Gessner is vice president of Massillon Cable TV Inc.