Issue Briefs
A La Carte (Pay per channel)
August, 2009
Cable's method of delivering programming packages, with channels bundled into basic and digital tiers, has proven to provide both choice and quality to consumers. This model has enabled all programming networks, including niche networks that serve underserved audiences, to find and build an audience.
In recent years a number of organizations have examined the idea of receiving channels "a la carte" - priced and ordered individually rather than from a selected bundle - and have found serious flaws in that suggestion.
Under an a la carte system, consumers who now pay $60 per month for expanded basic cable service that provides more than 100 channels, may need to pay the same $60 for a fraction of the channels they currently receive. Such a scenario would literally turn back the clock on one of the nation’s most technologically-advanced industries and programming diversity that deregulation has fostered.
Various independent studies have found that a "pay per channel" mechanism could "result in higher per channel rates," and that consumers "would likely face an increase... of between 14 percent and 30 percent." Independent financial analysts at Bear Stearns echoed the conclusion, finding that prices would rise for consumers electing more than six channels. Booz Allen Hamilton, in a study conducted for the industry, also declared consumers the loser in a per-channel charge world.
Some claim per-channel charge regulations would be a good antidote to the "skyrocketing" cable prices since the Telecommunications Act of 1996. The argument is off the mark. In fact, consumers are getting a much richer cable product since then, as cable has added hundreds of new channels. Also, when inflation is accounted for, the price per channel - a more honest measure of cable pricing - decreased from 1997 to 2002, according to a study commissioned by Comcast.
A la carte proponents claim that the pay-per-channel proposal is gaining steam among a chorus of civic organizations. Just the opposite is true. More than a hundred organizations on the political left and political right - ranging from economic conservatives such as Americans for Tax Reform and the Cato Institute to the vanguard of the civil-rights community, such as the NAACP, the National Urban League, the League of United Latin American Citizens, and the National Asian Pacific American Legal Consortium - have announced their opposition to the proposal.
- Cable's popularity and growth has prospered through the current bundling of networks, resulting in widespread choice and diversity of programming; a la carte would jeopardize existing popular networks and make the launch of new networks potentially impossible.
- A la carte would drive up the per-subscriber cost of programming, while imposing costs of additional equipment, additional bandwidth, and customer care on operators - all of which would result in higher prices, reduced program quality and less diversity of programming for their customers.
- A la carte would result in consumers paying more for less. Every analysis concludes that, under a la carte, consumers would receive far fewer channels for the price they pay today to receive the entire array of channels on the basic and enhanced-basic tiers.
- Because a la carte would reduce advertising revenues and increase marketing costs for many program networks, it would significantly increase subscriber fees and/or reduce the quality and quantity of available program networks.
- A la carte would fundamentally alter the way people enjoy television. The promise of cable from the beginning has been to give viewers a broad array of viewing options. A la carte would destroy that model, forcing viewers to lock in their choices in advance, and depriving them of the ability to easily explore new shows and networks.
Even the FCC, which has offered some support for a la carte, suggests only that some customers - specifically, customers who already have digital boxes - could receive 20 channels for about the same amount as they pay today for up to 150 channels. In other words, you could purchase one egg for the price of a dozen. Would newspaper publishers deliver just the sports and business page to one home, while next door the front page and comics are only delivered? At a reduced price?
The marketplace is working. We don't need a U.S. Department of Television. The marketplace in which cable, satellite, broadcasters and others vigorously compete for customers and viewers should decide video offerings, not mandates.
© 2010 Broadband Cable Association of Pennsylvania