Is cable TV 'a la carte' actually being considered?

By Scott M. Fulton, III, BetaNews

November 15, 2007, 3:45 PM

The FCC is considering invoking a legal clause that lets it squeeze more diverse programming into cable TV systems, but CATV's leading advocates are resisting.

Last week, US Federal Communications Chairman Kevin Martin indicated he may at last succumb to requests submitted throughout his tenure, to use a legal tool to help wedge more diverse programming into cable TV lineups. The tool is the so called "70/70 clause" of the Cable Communications Act of 1984 - a part of federal code that predicted a future time when cable programming would be more commonplace.

"At such time as cable systems with 36 or more activated channels are available to 70 percent of households within the United States," the Act reads, "and are subscribed to by 70 percent of the households to which such systems are available, the Commission may promulgate any additional rules necessary to provide diversity of information sources."

Chairman Martin told The New York Timeslast week that he may be ready to invoke that clause. No formal statement has yet been issued on behalf of the FCC, but that day may come soon.

In lieu of that statement, some press sources and many industry organizations and analysts have been drawing their own conclusions. On the table, they say, is the possibility of so-called a la carte programming, in which the FCC could force cable providers that are dominant in their respective metropolitan areas to offer channels to subscribers not in the conventional "Basic" and "Premium" packages we're accustomed to seeing, but instead through menu choices catering to individual customers' tastes.

That way, people who don't watch Fox News anyway don't have to be paying for it. Conceivably, such an approach would have a far-reaching impact on the licensing fees programmers receive from cable companies. Those fees imposed by a program provider such as Time Warner and Discovery Networks are typically determined by way of assessing the number of subscribers in an entire system.

That structure could be thrown into complete disarray if it were forced to be based on how many subscribers actually choose to have on their local TVs. Would you pay for a channel you don't watch if you didn't have to?

For that matter, would you choose a more "diverse" channel if you could? The answer to that question might come back to bite the very advocates who believe the Act's 70/70 criteria were met long ago. Those advocates include the Media Access Project, a public interest defender of media interests, who have argued this point since April of last year.

Meanwhile, the cable industry's principal advocacy coalition - the National Cable and Telecommunications Association - is working to pre-empt Martin's move, by twisting an already spiraling debate on its ear. In a statement yesterday, NCTA President Kyle McSlarrow characterized the whole issue, ironically, as a move to wedge more "must carry" provisions back into the law, limiting customers' choices.

"The Chairman's office continues to offer a tired and false analysis of price and value for cable video subscribers," McSlarrow said yesterday, "based on surveys ten years ago when consumers only paid for an average of 45 analog channels. A real analysis of cable prices shows that consumers are watching more and paying less for that viewing time. And a moment's reflection suggests how absurd it is to compare a small analog offering of ten years ago with today's offering of digital, high definition, and video on demand."

The fact that cable can bundle telephone and Internet service together with TV, he went on to say, gives consumers a 23% price savings for those services, despite the fact that cable rates by themselves are rising.

"The proposals made by the Chairman for an a la carte mandate and other intrusive regulation will raise prices and reduce programming diversity according to every single credible study," McSlarrow continued. "Chairman Martin's various 'leased access' and 'must-carry' proposals amount to a bandwidth grab that will limit available channel space for new programmers and new services."

Advocates of invoking the 70/70 clause point to data provided recently by industry reporters Warren Communications, concluding that cable television currently services 71.4% of the "relevant market" for TV services - just tipping the scales, and enabling Chairman Martin to invoke the clause.

But the debate has prompted possible opponents of the measure on the FCC - Commissioners Deborah Taylor Tate and Robert McDowell - to formally question one of Warren's managing editors yesterday about the accuracy of that data.

"As you are aware, over the past three years, our [annual Video Competition] Report has found that cable subscribership hovers around 60%," the commissioners wrote in their letter to Warren yesterday. "With the increase in competition from satellite and phone companies, most large cable operators report a decline in subscribership. Thus, it was surprising to learn that Warren Communications reported a 71.4% subscribership rate this year, especially considering the two other major independent research outlets found rates at 61.1% (Nielsen) and 58.1% (Kagan)."

With the margin of error perhaps as high as 13.3%, Chairman Martin could perhaps be precluded from being able to even open debate on the issue. In that case, regulators and cable operators may be able to congratulate themselves once again for having maintained the status quo for another year.