'A La Carte Show’ Worth Watching

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The stars of the hottest new reality show aren’t survivors, serial daters or Trump apprentices. They’re cable companies and trade associations, government officials and religious groups.

It’s the “A La Carte Show,” and it’s coming not to television but to the courts and Congress, the Federal Communications Commission and a whole host of surprising places.

Let’s set the stage: Cable rates have recently increased to keep pace with inflation. Proponents of a la carte pricing claim that allowing consumers to select individual programs means more choice, lowers monthly bills and places more control in the hands of the viewers who want control over what they watch in their households.

Opponents maintain that switching from the current tiered system to a la carte pricing would lead to higher consumer prices and deliver the death knell to dozens of diverse cable channels and networks.

With the scene shifting to this week’s FCC symposium on a la carte pricing, let’s take a look at the roles the stars of this are program are playing, and what they have at stake.

THE GOVERNMENT

The notion of a la carte pricing was first promoted by Senate Commerce Committee chairman John McCain (R-Ariz.) in the 1990s. It’s received strong backing from other lawmakers, including Rep. Nathan Deal (R-Ga.), whose proposal would bar cable program suppliers from demanding tier placement for their channels. However, Deal’s proposal would not require cable companies to offer a la carte pricing.

Nonetheless, McCain, Deal and other supporters have run into some resistance. A General Accounting Office report released last fall said a la carte could “result in higher per-channel rates” and “cable rates could actually increase for some consumers.”

The GAO also concluded that “some cable networks, especially small and independent networks, would not be able to gain enough subscribers to support the network” and that a la carte pricing would only lead to higher prices, less choice and diminishing diversity in cable channels for consumers.

Additionally, at a recent meeting of the House Commerce Committee’s Subcommittee on Telecommunications and the Internet, various members criticized a la carte pricing.

Ironically, according to the National Cable & Telecommunications Association, a government push for mandated a la carte offering could mean the end of C-SPAN, which is completely funded by cable companies and provided free of charge to the government to showcase its floor and sub-committee meeting.

THE CABLE OPERATOR

Cable operators have the strongest arguments for or against a move towards a la carte pricing. Most large cable operators oppose the idea, believing it will fracture the industry’s economic model and create a range of problems, from providing all subscribers with set-top boxes to developing a uniform pricing structure.

They also claim it will lead to fewer choices for consumers, much less diversity in terms of programming and ultimately higher prices.

Cable companies claim they can’t offer a la carte right now, because programmers bundle all their channels together when negotiating contracts and rates. Should the FCC elect to adopt a la carte pricing, it would result in a flurry of legal activity as many existing programming agreements would have to be renegotiated.

While larger cable companies may unilaterally oppose it, smaller regional cable operators are split. Many support a la carte pricing, since they don’t have the leverage to negotiate more favorable terms with programming as do their big brothers. The elimination of tiering may be a way to level the playing field.

THE PROGRAMMER

Programmers that provide channels and content are considered to have the most at stake, and for the most part they oppose a la carte pricing.

Some established channels, such as Court TV, say they could not survive under an a la carte model. Often citing the creation and success of Bravo’s Queer Eye for the Straight Guy, programmers and industry pundits claim this type of programming would have never made it onto the airwaves if Bravo were not included on a basic tier.

SOCIAL, CONSUMER AND TRADE ORGANIZATIONS

This debate has made strange bedfellows of groups with differing views on issues. Organizations that promote traditional family values argue that parents should have the option of choosing and paying for the channels they want and to keep content created for a more mature audience out of their homes.

They claim a household with young children should not be forced to receive MTV: Music Television when they really want Cartoon Network, Nickelodeon or the Discovery Channel.

Additionally, consumer advocacy groups believe consumers deserve the right to select the content they want, but their argument has more to do with pocketbooks than moral perspective. They claim a la carte pricing is an antidote to rising cable rates and a stifling of customer choice.

Ironically, the debate over a la carte has some religious groups in a difficult situation. For the most part, they support keeping risqué networks out of their homes, but realize a la carte cable could eliminate faith-based networks due to the inability to bundle these networks with more popular, revenue-generating networks.

While social and consumer advocacy groups have managed to agree on this issue, they are opposed by the NCTA. The trade group has released a report which, much like the GAO’s report, refutes an a la carte system, stating that consumers would end up paying more for less, and that new networks would find it next to impossible to succeed in the marketplace.

So, will there be a final answer, and what will it be?

In its current format, it is difficult to foresee strict a la carte pricing being universally accepted. It just doesn’t make economic sense and could break the business model for cable television that has served the viewing public well despite some of its recent criticisms. With the Democratic and Republican conventions imminent, the political tone of this debate cannot be ignored.

The Janet Jackson Super Bowl incident has intertwined the a la carte issue with the indecency issue. So it seems that some changes may be forced on the industry.

A compromise solution may be reached by adopting a “themed-tiering” pricing structure where cable companies would offer consumers a package of networks based on specific niches. As the recent NCTA report notes, this option has its flaws; it struggles to respond to the key concerns of a la carte detractors. However, themed tiering provides consumers with another option and enables us to select the programming we will allow in our homes, while causing the least disruption to the current billing system and cable’s technology infrastructure, a key concern to the MSOs. Cable operators may be willing to provide this as an option in conjunction with the current pricing system as a way of offering greater flexibility to their customers.

With all of the variables inherent to this debate, and given the upcoming Presidential election, it’s likely the a la carte show will go on for some time. Like any good reality program, we can expect a few unexpected twists and turns, and it will certainly continue to generate a buzz within the industry. Stay tuned!

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