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À La Carte Is Off The Senate's Menu - Broadcasting & Cable

À La Carte Is Off The Senate's Menu

Commerce Committee won't buy McCain's bid to split cable pricing
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Cable programmers can breathe a little easier. Efforts to force cable operators to price channels on an individual basis—or "à la carte"—are all but dead for this year, Senate Commerce Committee Chairman John McCain acknowledges. Last week, without enough votes to move the idea through his own committee, the maverick Republican instead promised only to explore a pilot program pitched by cable nemesis Consumers Union.

The industry believes à la carte service would severely harm cable networks, especially small networks with niche audiences.

McCain, who has been fighting cable rate hikes for years, will step down from the committee's helm at the end of 2004 without winning the battle.

CU's Washington director Gene Kimmelman urged Congress to mandate that operators allow digital subscribers to buy channels à la carte, arguing that the practice would cut customers' bills drastically.

Experimenting on digital-tier customers would be easy, he says, because digital set-top boxes can readily be programmed to block channels subscribers don't buy. "If the FCC finds during the experiment that everybody's prices go up, then you can stop it:" Kimmelman says. "We would want you to stop it."

According to the FCC, overall monthly subscription rates increased at three times the rate of inflation between 1996 and 2003. Cable operators blame the climbing prices on programming costs, especially for sports networks like ESPN.

License fees for sports networks climbed 59% from 1999 to 2002, versus 26% for non-sports channels, according to Kagan World Media.

But à la carte pricing has received a lukewarm and sometimes hostile reception from many of McCain's Commerce Committee colleagues.

"The current model allowing channels to find an audience and reach a critical mass of subscribers to attract advertisers would be completely undermined," says Sen. Conrad Burns (R-Mont.).

Adds Sen. Bill Nelson (R-Fla.): "I am naturally inclined to keep programming packages as they are to sustain viability."

Despite strong support from others, the general ambivalence indicates McCain would have trouble getting Congress as a whole to go along with the idea.

A just-released General Accounting Office report concluded that, for consumers, the value proposition of à la carte versus a conventional cable package is a toss-up.

"An à la carte approach would provide consumers with more individual choice" but "could result in reduced advertising revenues and might result in higher per-channel rates and less diversity of program choice," the GAO concluded.

Complaints over raunchy programming on basic-cable networks such as MTV and Comedy Central prompted some social conservatives on McCain's committee to jump on the à la carte bandwagon as a way to help parents decide which channels come into their homes.

The cable industry swiftly blunted many of the indecency concerns two days before the hearing by announcing that many operators will provide free channel-blocking technology to subscribers.

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