Some See 'A La Carte’ Spiking Rates

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To some, a la carte is just French for rate regulation.

Let’s assume that cable operators had to offer every channel a la carte while continuing to offer tiers.

In theory, cable operators could protect tier penetration by charging astronomical prices for a la carte channels, making them an unrealistic alternative.

Because cable’s actions would undermine the goals of an a la carte scheme, would Congress or the Federal Communications Commission have to set the price of a la carte channels?

'INEVITABLE’ REGS

House Telecommunications and the Internet Subcommittee chairman Rep. Fred Upton (R-Mich.) suggested at a hearing two weeks ago that rate regulation would be inevitable in an a la carte world.

“What if a channel, say ABC, decides they are going to ask $10 a subscriber to carry the channel?” Upton said. “If that cable operator is forced to pass that along to the consumer, that doesn’t sound to me like a system that is going to provide consumers with more choice at cheaper rates. Wouldn’t Congress need to regulate retail and wholesale prices to make it work?”

Rate regulation is not an attractive option for Upton and other House Republicans who voted for the Telecommunications Act of 1996, which terminated FCC regulation of expanded basic effective March 31, 1999.

Doing so would be a concession that cable deregulation, which triggered $85 billion in cable spending on digital services, had been a mistake.

Upton posed his question to Gene Kimmelman, senior director of public policy at Consumers Union, perhaps with the intention of finding out indirectly whether Kimmelman’s current advocacy of a la carte was cloaking his traditional agenda: the reregulation of cable.

$10 WOULDN’T FLY

In his response, Kimmelman predicted that cable operators would reject ABC’s pricing demands and consumers would rebel if told they had to pay $10 for just one network.

“I would be hard-pressed to see them justify in the marketplace those kinds of prices,” Kimmelman said. “I can’t imagine cable operators would be willing to pay that. There would be a lot of marketplace pressure for those prices to actually go down.”

Kimmelman added that ABC was probably a bad example.

“We are suggesting you keep a basic tier so that broadcast channels wouldn’t be affected by that,” he said.

The basic tier, which includes local TV stations, remains price-regulated by state and local governments unless an operator can demonstrate to the FCC that it’s subject to effective competition, which typically means direct-broadcast satellite operators and overbuilders have attained 15% household penetration in the market. (For more on the a la carte debate, see Policy, page 46.)

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