Federal Communications Commission Republican Robert McDowell voiced strong doubts last Wednesday that the agency should force cable programmers to wholesale their channels on an unbundled or a la carte basis as proposed by FCC chairman Kevin Martin.
McDowell described the cable programming market as “a fragile economic ecosystem” moving increasingly in the direction of allowing consumers to see what they want when they want, especially over the Internet.
“Once we disrupt that, at a time when it is being disrupted already through natural market evolution, I am not sure the government wants to put its heavy thumb on the scale,” McDowell said. “So I think we have to be really, really careful.”
McDowell’s comments came in an interview hosted by Multichannel News and Broadcasting & Cable and streamed live over the Internet without charge to listeners. A rebroadcast of the Webinar, called “Rules of the Game 2008: At The Digital Crossroads,” will be available online at www.multichannel.com/rules2008.
In fielding questions for an hour, McDowell touched on many major media and telecommunications issues before the agency, from the transition to digital television and new cable ownership rules to spectrum sharing of the broadcast TV band and vigilant oversight of the FCC by Congress.
McDowell’s remarks about wholesale a la carte mandates put him at odds with Martin, who believes that small cable operators in particular are being forced to distribute more channels than they desire because they don’t have the market power to reject channels offered in a bundle by much larger corporations.
The Walt Disney Co., for example, provides ESPN, its popular sports channel, on a standalone basis. But the company refuses to distribute ESPN2 and ESPNEWS in the same manner, requiring anyone interested in ESPN2 to license the rights to ESPN. Disney has argued that the FCC has no legal authority to stop programmers that elect to wholesale channels only on packaged basis.
The FCC is expecting to receive a final round of comments by Feb. 12. After the record closes on that date, Martin could bring the matter up for a vote at any time.
Martin sees wholesale a la carte as a means of lowering retail cable rates. According to Martin, monthly cable bills doubled from 1995 to 2005; but his analysis excluded inflation, channel additions and improvements in the quality of programming.
“I would take the chairman at his word. This sort of thing is a priority for him, and treat it accordingly,” McDowell warned.
The wholesale a la carte issue could be Martin’s last big fight with the cable industry over programming, as Martin is likely to step down next January to coincide with the departure of the Bush administration. If cable fights wholesale a la carte in court, the final judicial outcome probably wouldn’t be known until long after Martin had left his post.
McDowell also indicated that he disagreed with FCC Democrat Michael Copps on a key issue in the wholesale a la carte debate: Whether the FCC can cap a la carte prices to ensure that the a la carte offering is a realistic option.
“Once you start tinkering upstream [the sale of programming to distributors], all that causes a bellywasher down stream [the sale of programming to consumers] and it could adversely affect consumers’ prices adversely,” McDowell said.
In theory at least, a programmer could undermine the intent of regulation by pricing a la carte channels so high that purchase of the bundle was the only rational option.
Last Tuesday, Copps told reporters he thought the FCC could achieve its goals without getting into price controls.
“I guess it depends on how your craft the rules. I would imagine it’s within the ability of us to craft some rules that wouldn’t necessarily go to regulating price by price,” Copps said.
ON OTHER TOPICS
McDowell also said he:
Opposes moving the Feb. 17, 2009 digital TV transition deadline, saying “I can’t think of any arguments that I would agree with for us to do that.”
Predicts the courts would toss out the newly adopted cable ownership limit of 30% of all pay-TV subscribers, saying “I will bet my farm that this will be stuck down by the [U.S. Court of Appeals for the] D.C. Circuit once again.”
Believes the occupation of vacant TV channels by unlicensed, low-power wireless communications devices shouldn’t be political, saying “I’ve said a couple of times that I really want science to drive the resolution of this issue.”