# Sides Debate a la Carte at FCC



## Chris Blount (Jun 22, 2001)

The Federal Communications Commission received its first wave of filings on a la carte Thursday, and the effort to give consumers programming choice got mixed support from those commenting on the issue.

In its comments, DirecTV said a voluntary a la carte proposal may benefit pay-TV services. By requiring programmers to offer products on an a la carte basis, "the new regime would give MVPDs (multichannel video programming distributors) at least some incremental increase in leverage when bargaining with programmers."

The company added, "Moreover, because MVPDs would be allowed to provide their services to customers on an a la carte basis but would not be required to do so, MVPDs would ultimately be able to make their own distribution decisions."

Nonetheless, DirecTV said a la carte carries at least two negatives. First, programmers may charge "extremely high" affiliate fees for a la carte distribution, and some networks would not survive in an a la carte regime. Second, DirecTV said it could incur "substantial costs in offering such service, regardless of the number of subscribers that actually signed up."

The National Cable and Telecommunications Association made the most noise at the Portals, saying in its 134-page filing that mandated a la carte "raises the most serious policy, economic and legal concerns. It injects the government into myriad, and intricate, pricing arrangements among hundreds of program suppliers and thousands of operators who distribute the programming."

The NCTA also said any a la carte regime "erects a high hurdle for new programmers, especially those with narrow and diverse focus."

As for other comments, the Progress and Freedom Foundation said a la carte would result in higher prices, lower viewership and less program availability for consumers. And, for the most part, programmers voiced opposition to any a la carte requirements.

As for a la carte support, the Ratepayer Advocate joined a few others in saying that program choice would help address cable rate increases, especially given that the satellite TV competition "has failed to effectively control these runaway cable prices. Therefore, the time has come to give consumers more choice in picking the cable channels they want instead of being forced into buying a tier of channels, some of which they never watch," the group said.

The Satellite Broadcasting and Communications Association didn't submit comments on a la carte.

http://www.skyreport.com (Used with permission)


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## Anonymous (Jun 19, 2004)

I think that rather than a la carte, the following would be better for consumers: If it costs (hypothetically) $700 to subscribe to all the channels that a provider offers. Then that $700 should be divided by 525600 (roughly the number of minutes in a year). So, with this new service the customers would have access to all of the channels available and be charged $0.0013318 per minute. If you watch cartoon network for an hour, you get charged $0.0790. Thus, if someone watches 24 hrs a day all year, they get charged $700. $700 if they watch 1 channel all year, or $700 if they watch 150 different channels during the year. Of course, for premium channels like HBO, they could charge $0.0167 per minute (roughly $1/hr). Currently pricing is not fair and is not based on use. Someone who watches 300 hrs per month is charged the same as someone who watches 80 hrs per month. Fees should never be based on what someone can watch but rather what they do watch. A la carte tries to solve this problem but is technically more difficult and costly to implement than simply metering viewing. It would be easier for companies to set up 5 or so rates and charge the user that per minute rate depending on what they watch. Roughly half or more consumers would save a lot of money, while the other half may end up paying more. But those that end up paying more would be those who spend most of their day watching tv. This would actually save operating costs, cable companies won't have to change out filters on the line when a customer changes programing and no one will need operators to take programming change orders. You will have to provide a means of metering by mail for people without phones. If the smart card they mail in at the end of the month shows it was not inserted into the right machine, they could get fined for example. The smart card could record encryption keys all month transmitted on a particular channel. A card without enough of these keys to match the amount of up time for the service would be considered hacked.

Better stop before I make less sense.


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## syphix (Jun 23, 2004)

So, if you pay by how much you "watch", how would DVR's fit in? They're "always watching" something w/ their buffer...how could they tell?

Or what about my TiVo, which records suggestions which I may or may not actually watch, but have been charged for under the "use metered payment plan"?


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## amit5roy5 (Mar 4, 2004)

But your proposal makes pay TV more expensive.



Anonymous said:


> I think that rather than a la carte, the following would be better for consumers: If it costs (hypothetically) $700 to subscribe to all the channels that a provider offers. Then that $700 should be divided by 525600 (roughly the number of minutes in a year). So, with this new service the customers would have access to all of the channels available and be charged $0.0013318 per minute. If you watch cartoon network for an hour, you get charged $0.0790. Thus, if someone watches 24 hrs a day all year, they get charged $700. $700 if they watch 1 channel all year, or $700 if they watch 150 different channels during the year. Of course, for premium channels like HBO, they could charge $0.0167 per minute (roughly $1/hr). Currently pricing is not fair and is not based on use. Someone who watches 300 hrs per month is charged the same as someone who watches 80 hrs per month. Fees should never be based on what someone can watch but rather what they do watch. A la carte tries to solve this problem but is technically more difficult and costly to implement than simply metering viewing. It would be easier for companies to set up 5 or so rates and charge the user that per minute rate depending on what they watch. Roughly half or more consumers would save a lot of money, while the other half may end up paying more. But those that end up paying more would be those who spend most of their day watching tv. This would actually save operating costs, cable companies won't have to change out filters on the line when a customer changes programing and no one will need operators to take programming change orders. You will have to provide a means of metering by mail for people without phones. If the smart card they mail in at the end of the month shows it was not inserted into the right machine, they could get fined for example. The smart card could record encryption keys all month transmitted on a particular channel. A card without enough of these keys to match the amount of up time for the service would be considered hacked.
> 
> Better stop before I make less sense.


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## koji68 (Jun 21, 2004)

I have a package to watch just 2 channels I like. The other 12-14 channels, I don't ever watch them. I'd pay half of what I'm paying for those 14-16 channels to get just 2 channels. I'd be paying more per channel but less overall.


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## RichW (Mar 29, 2002)

koji68 said:


> I have a package to watch just 2 channels I like. The other 12-14 channels, I don't ever watch them. I'd pay half of what I'm paying for those 14-16 channels to get just 2 channels. I'd be paying more per channel but less overall.


The trouble is that the programmer may not want to charge you only half of what you are paying, but a fee closer to the total you are now paying In other words, by cherry-picking the channels you are depriving him of counting you as a viewer of those channels you don't watch and thus those channles get less revenue. Therefore he must make up the loss by charging you more for the channel you do subscribe alacarte. I know that sounds screwy but that is the way the system works. I think the best system is for a tiered system rather than ala-carte. Or at least ala-carte as an option, rather then the rule.


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## dogger01 (May 24, 2004)

I would like this for the sports package. All I want is Fox Sports World. When any major sport event is on (MLB, NHL, etc.) they are blacked out anyway so why would I pay to have all the Fox regonal sports channels when everthing is blacked out due the sports subscription offered by DTV. I would like to purchase the one channel for maybe $1.99 a month or something like that.


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## SandyEggo (Jul 16, 2004)

If they don't require a la carte, I would like to see restrictions on what channels are grouped in packages. I think the cost (charged to the provider) for a channel should not be much higher than the average price of the other channels in the package. That would probably mean that ESPN would not be able to be in the same package as the "general" channels. Presently Disney requires ESPN to be in the "general" channel package. If the restricition that I want would be adapted, Disney's could not require this (unless if they drastically lowered the cost of ESPN).


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## RichW (Mar 29, 2002)

SandyEggo said:


> If they don't require a la carte, I would like to see restrictions on what channels are grouped in packages. I think the cost (charged to the provider) for a channel should not be much higher than the average price of the other channels in the package. That would probably mean that ESPN would not be able to be in the same package as the "general" channels. Presently Disney requires ESPN to be in the "general" channel package. If the restricition that I want would be adapted, Disney's could not require this (unless if they drastically lowered the cost of ESPN).


That sounds like an excellent idea! Tiers could then be grouped by price, as an alternative to theme. Thus you could buy a cheap sports package or an expensive sports package or both (hopefully for an even greater discount). The DBS providers kind of have that system in place now when they fight to keep iexpensive channels from being required to be included in their least expensive package.


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## Jacob S (Apr 14, 2002)

I think the best way to deal with this is to make ala carte an option. Even if they said that ala carte had to be made available packages should still be made available and I think a lot of people would not bother with picking and choosing their channels but stick with the packages.

If ala carte started to exist the satellite and/or cable providers may offer more promotions to new/existing customers which would require the purchase of the packages.


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## Big Bob (May 13, 2002)

Why stay with the channel mentality?

Right now, all we can buy are packages of channels.
The proposal is to allow customers to purchase individual channels.
I would like the ability to purchase individual programs. 

Think about it. It is the logical conclusion to the arguments for a la carte. Why should you be forced to pay for something that you don't want? The ultimate Pay-Per-View.

Don't think it will happen anytime soon, but it is interesting to think about.


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## Mike D-CO5 (Mar 12, 2003)

IF they do allow Ala cart then I think you will see alot of channels go off . They will hike the price of the remaining channels so that a lot of people won't buy them either. Imagine when Discovery Hd was like 9.99 for one channel , how many people bought this one channel? For that matter I think that the hd pack is a little high now for the few channels in it now. Now imagine that the price for each channel rose because there was no more discounts to the providers for carrying a group of channels that the broadcasters wanted them to carry. You might actually end up with less channels for the same price you pay now. Less Choice for more money. I think we will all lose then. 

OF course I could be wrong. But either way Free Market Pricing may just put several channels out of business. The highest price channels will most likely price themselves out of business. People actually only watch about 15 - 20 channels consistently anyway. We might see a return to the cable systems of the late 70's and 80's with only like 30 - 40 channels vs the 200 channels we have today.


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## keng52 (Oct 18, 2003)

I Pay for more channels than I watch. Its unfair. Taxation without observation.


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## amit5roy5 (Mar 4, 2004)

A la carte will only increase costs. Because broadcasters will see a decline in some channels they may offer, they will raise the prices. Especially if you are in a family where everyone has a different taste.


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## jpurkey (May 15, 2003)

Big Bob said:


> Why stay with the channel mentality?
> 
> Right now, all we can buy are packages of channels.
> The proposal is to allow customers to purchase individual channels.
> I would like the ability to purchase individual programs.


That would be good to have in addition to the ability to purchase individual channels. There are some channels in which I may watch only 1 or 2 programs a year on.

What I like to see: A basic tier that includes channels with either no per-subscriber cost or with a maximum cost of no more than 5-10 cents per subscriber. Even at 10 cents per channel you could have a package of 100 channels for $10 (+ any profit for the provider.) The basic teir would also include channels that pay to be carried, such as the shopping channels.

The more expensive channels could then be grouped by theme, be it sports, educational, music, news, etc.

Of course, it is just a dream...


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## kc1ih (May 22, 2004)

jpurkey said:


> That would be good to have in addition to the ability to purchase individual channels. There are some channels in which I may watch only 1 or 2 programs a year on.
> 
> The more expensive channels could then be grouped by theme, be it sports, educational, music, news, etc.
> 
> Of course, it is just a dream...


What yor are suggesting is exactly what they have on Canadian satellite services. If it works there, why not here?


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## djlong (Jul 8, 2002)

Here's the thing. The programmers are afraid that, suddenly, they'll have far fewer viewers subscribed to their channels. They'll fear falling ad rates.

But the part that they can't bring themselves to say out loud is, those people who don't subscribe a-la-carte?? THEY WEREN'T WATCHING YOU ANYWAY!!!


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## Jacob S (Apr 14, 2002)

Even if they got the same amount of money out of one channel instead of, for example, six channels they may have carried, they still lose money on lost advertisement, therefore a higher cost for the one channel. The end result is paying more for the one channel vs. the six there used to be UNLESS a lot or most people still take the packages.

This would force many channels to offer more compelling content so that people will keep purchasing their service so even if the one channel would be higher, it could have a bit better content as a result, especially if the ratings are not so great.


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## FTA Michael (Jul 21, 2002)

amit5roy5 said:


> A la carte will only increase costs. Because broadcasters will see a decline in some channels they may offer, they will raise the prices. Especially if you are in a family where everyone has a different taste.


What sets prices? Once they're set, what causes them to go up or down?

Businesses set prices to maximize profits, short-term or long-term. If a product isn't selling, or if a sister product isn't selling, simply raising prices won't restore maximum profits. If a business thought it could increase profits by raising the price of its product, it would raise it already.

A la carte will probably hurt some channels, considering that almost any change in the status quo will help some channels and hurt others. My guess is that it will hurt the weaker channels currently bundled by content providers. Based on who's on which side of the issue, a la carte will probably result in reduced profits for the current large-scale content providers.

IMHO, one point I rarely see addressed is a big reason for content providers to oppose a la carte: Once they get sufficient carriage for a channel, they can do _anything_ with that channel. Look at history.

* The former Madison Square Garden network morphed into the sports-and-Night-Flight USA Network, which morphed into a movies-and-reruns independent station of the same name.

* The former Cable Health Network, with Dr. Ruth, morphed into health-and-other-stuff Lifetime, which morphed into a women-mostly Lifetime.

* The Family Network. I don't have room for all its changes.

* More recently, The Nashville Network, a country music showcase, morphed into The National Network of auto racing and ST:TNG reruns, then morphed into Spike, the "Men's Network" of Slamball and ST:TNG reruns.

* More quietly, American Movie Classics, a longstanding home of commercial-free classic movies, morphed into AMC, a commercial-laden home of mostly recent movies.

My point is when content providers get a beachhead (NickToons or whatever), they can decide months or years later to change the focus a little or a lot. Meanwhile, they stake out the bandwidth real estate that effectively prevents the B-Mania's of the programming world from finding an audience on cable/DBS. *That* is a hugely valuable long-term asset, and that's what the content providers are fighting so hard to preserve. IMHO.


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## red hazard (Apr 11, 2004)

I don't buy some of these doom and gloom scenarios. Ad rates are determined by the number of viewers, not the number of subscribers capable of viewing the channel. There are some foreign language customers who only are interested in one or two International channels and only subscribe to those. If a customer does not meet a minimum revenue commitment, then the MPVDs can charge an extra 5 dollar service charge like Dish does for International programming only customers. Why should someone have to go to another tier to get perhaps just one more channel that they are interested in? Like spending another 10 dollars a month to get the Speed channel that is not in Dish's Top 120 for example.


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## jpurkey (May 15, 2003)

djlong said:


> Here's the thing. The programmers are afraid that, suddenly, they'll have far fewer viewers subscribed to their channels. They'll fear falling ad rates.
> 
> But the part that they can't bring themselves to say out loud is, those people who don't subscribe a-la-carte?? THEY WEREN'T WATCHING YOU ANYWAY!!!


Good point. I still think it has more to do with high priced channels like ESPN/Disney worrying over losing subscriber imcome.

$3 per subscriber * 12 million DTV customers = $36 million a month or $432 million a year. If 50% decide not to take the channel a lar carte that would be a yearly loss of $216 million. (And that is just DirecTV.)

Channels with a low per subscriber cost have a lot less to lose. Many people would (or at least I would) continue subscribing to a channels that cost less than 10 cents/month even if they don't watch them often.


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## harsh (Jun 15, 2003)

Big Bob said:


> Why stay with the channel mentality?


Because someone would undoubtedly get whiney about forgetting to turn off their receiver and getting billed for a few days of Nickelodeon while they were on vacation.


Big Bob said:


> Right now, all we can buy are packages of channels.
> The proposal is to allow customers to purchase individual channels.
> I would like the ability to purchase individual programs.


This is an interesting idea, but it would be impractical in the DBS marketplace where you don't have a ready (phone)line of communication back to the provider. Imagine how many transactions there would be if someone were channel surfing! I can see where cable operators could, with significant re-allocation of bandwidth, handle the load, but not in an over-the-air or satellite scenario.


Big Bob said:


> Think about it. It is the logical conclusion to the arguments for a la carte. Why should you be forced to pay for something that you don't want? The ultimate Pay-Per-View.


I guess the best analog that I can think of is having your employer pay you only for the time that you are being productive. Are you willing to keep track of when your mind strays from work? What if the spirit moves you to work on something that wasn't assigned? How will they account for helping a coworker?

As it is with many other forms of intellectual property, you need to charge a flat rate simply to avoid the overhead of keeping detailed accounting of every move (intentional or accidental) that a "subscriber" makes (or, perhaps, doesn't make).


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## harsh (Jun 15, 2003)

red hazard said:


> Ad rates are determined by the number of viewers, not the number of subscribers capable of viewing the channel.


It is abundantly apparent that there is something driving the content providers to bundle these "limited appeal" channels. All indicators point to the idea that there must be some factor assigned to the breadth channel is carried.


red hazard said:


> Like spending another 10 dollars a month to get the Speed channel that is not in Dish's Top 120 for example.


Bad example as The Speed Channel is part of Top 120 (but not 60 and 60+). Outdoor Life Channel would be a proper example.

One of the reasons that I don't subscribe to my local cable operator's upper levels of service is largely because of their packaging of The Speed Channel and placing it in a goofy bundle with a small group of other channels that I couldn't care less about. Effectively I would have to pay $6.99/month just to get Speed. The Speed Channel is not part of their "everything" package so even if I was paying $100+ per month, I would still have to spend another $6.99 to get it.

I think there must be some middle ground and I'm not sure that I can recommend anything more sound than theme bundling.


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