McCain Unveils a la Carte Bill

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A cable operator that sells programming a la carte could escape local franchising and trim its franchise-fee payments to local governments under a bill unveiled by Sen. John McCain (R-Ariz.) Thursday.

McCain, who has yet to introduce his long-awaited, incentives-based approach to the a la carte issue, included a provision that is likely to stir trouble with broadcasters.

Under the bill, a broadcaster that refused to permit the a la carte sale of an affiliated cable network would lose its nonduplication rights under Federal Communications Commission rules.

In a real-world example, a cable company could import an ABC affiliate if The Walt Disney Co. refused to allow the cable system to offer ESPN a la carte in a market where Disney owns the ABC station. Disney owns the ABC network, 10 ABC stations and the ESPN sports channel.

"The National Association of Broadcasters does not believe any changes to the FCC's network-nonduplication rules are warranted," NAB spokesman Dennis Wharton said.

In a prepared statement, the National Cable & Telecommunications Association attacked the McCain bill.

Because the bill’s franchising relief would apply to any video provider that uses public rights of way, DirecTV Inc. and EchoStar Communications Corp. are not directly affected.

"It is completely unnecessary for the federal government to disrupt a competitive marketplace and engage in the pricing and packaging of video services,” the NCTA statement said. “The home-video marketplace -- which, the FCC has recognized, is providing consumers with more choice than ever before -- should decide video offerings, not government intervention imposed from Washington, D.C."

Verizon Communications Inc. applauded McCain’s approach.

“For years, Sen. McCain has been a champion for the American consumer, and we welcome his voice to the video-franchise debate. Sen. McCain’s initiative adds to the momentum for passing video-choice legislation this year,” Verizon senior vice president for federal government relations Peter Davidson said.

Today, dozens of cable networks are sold in packages called tiers, which expose cable customers to a wide array of programming at probably the lowest per-channel price obtainable.

A la carte proponents believe programming sold in that manner would cut cable bills and allow parents to exile indecent programming without paying for it. Many in the cable industry -- Cablevision Systems Corp. being a notable exception -- claimed that a la carte would hike cable bills and bankrupt niche channels that can't exist outside of the tiering structure.

McCain, a la carte fan for years, was unable to introduce the bill Thursday, but he is expected to do so soon. He could try to attach it to a major telecommunications bill scheduled for a Senate Commerce Committee vote June 20.

According to a summary of the McCain bill, cable operators that satisfy the a la carte requirement could obtain a national franchise, paying no more than 3.7% of gross video revenue in franchise fees.

The bill also includes restrictions on institutional networks and channel-capacity set-asides for public, educational and governmental channels of programming.

Also according to the bill summary, to become eligible for a national franchise, a cable operator must own a cable channel “offered on the basic tier of a digital-cable system”; must make that affiliated channel available a la carte to its subscribers and not prevent other distributors from selling it a la carte; and must notify the FCC that it will sell a la carte any channel that it was provided on an a la carte basis.

For cable operators that do not own programming, the bill requires them to notify the FCC that that it will sell a la carte any channel that it was provided on an a la carte basis.

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