Cable Channel-Shuffling Considered

WASHINGTON -- Congress has raised a question that the cable TV industry does not want to answer: Why can't I get SpongeBob SquarePants without having to buy Stripperella, too?

"By placing their most popular channels in expensive tiers with other channels most people don't watch or find offensive, the industry forces consumers to . . . buy bloated packages of channels in order to get the programming they actually do want," Gene Kimmelman, senior director of advocacy and public policy for Consumer Reports, told a House subcommittee this week.

The lawmakers are considering proposals to expand consumer choice in cable TV, such as "a la carte" channel choices or smaller groupings of channels with similar programming, known as "themed tiers."

But cable networks, media conglomerates, and cable system operators lined up to oppose government-regulated efforts to allow viewers to choose their channels instead of receiving a large bundle of stations. Even as they united against such "a la carte" fare, they blamed each other for failing to give consumers more choice. The Wednesday hearing was before the Telecommunications and the Internet subcommittee of the House Committee on Energy and Commerce.

Bundling for Bucks?

The five media conglomerates--Disney, Viacom, Fox/News, General Electric, and Time/Warner--are to blame, said Ben Hooks, president and CEO of Buford Media Group of Tyler, Texas, and past chairman of the American Cable Association. By leveraging ownership of the 50 or so most distributed cable networks, the media giants obligate cable companies to carry their other, less popular channels, Hooks said.

He said the restrictions hamper cable operators' ability to tailor their programming for the communities they serve, adding, "Quite simply, there is no choice now."

A Disney representative denied the conglomerates are "force-feeding" cable companies channels. Government action to require a la carte or tiered subscription offerings would only result in consumers paying more and receiving less, said Ben Pyne, an executive vice president for Disney and ESPN, with ABC Cable Networks.

"A la carte or tiering would drain advertising revenues from the system and precipitate increased equipment, marketing, and transaction costs," Pyne said.

Small Channels Bolstered

The advent of cable and the digitization of TV signals have resulted in numerous channels and highly fragmented audiences, which makes delivering mass advertising much harder. The cable industry has a financial interest in "bundling" as much programming as possible so advertisers can reach bigger audiences.

Smaller, more specialized channels such as those that offer minority-specific programming oppose a la carte distribution because, by themselves, they cannot get the viewership numbers needed to attract advertisers.

"Some advertisers have told us not even to come to see them until the network is in 20 million households," said Alfred Liggins, president and CEO of TV One, which caters to an urban and African-American audience.

Liggins said that with a la carte distribution, viewers would be able to "segregate themselves" against multicultural television programming.

Consumer Interests

Consumer groups were the only supporters speaking at the hearing of government-regulated a la carte and theme-tiered programming.

Janet LaRue, chief legal counsel for the media watchdog group Concerned Women for America, said federal law requires all subscribers to buy a first level of service, which must include local broadcast channels and community access channels, before they can purchase a second tier.

That tier consists of channels selected by the cable companies that subscribers must purchase in a package to get the specific premium channels they want, she said. They buy Nickelodeon to get SpongeBob, but also get Spike TV and Stripperella.

"The average cable customer watches only 12 to 15 channels on a regular bases, but cable companies bundle 50 to 75 channels in the expanded basic package, and upward of 200 in digital cable packages," La Rue said.

"It's like going to the store for a dozen eggs and being told you must buy at least six dozen, which is more than you can consume, including many that are cracked and broken."

Ongoing Interest

No further hearings are scheduled yet, but the panel expressed interest in looking further into the matter of new cable industry regulation. The FCC is also investigating the issue with a view toward the revenue structure of the industry.

Consumers might be better served by more flexibility in cable offerings, such as a menu selection rather than the common prepackaged mix, said John Muleta, chief of the FCC's Wireless Telecommunications Bureau.

He spoke at the AlwaysOn Innovation Summit at Stanford University, occurring at the same time as the Congressional hearing.

Peggy Watt of PC World contributed to this report.

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