# McCain wants FCC to try a la carte cable pricing test



## Mark Holtz (Mar 23, 2002)

From Hollywood Reporter:

*McCain wants FCC to try a la carte cable pricing test*

The chairman of the Senate Commerce Committee thinks it's time to begin a government-mandated experiment that could end the cable industry's practice of charging people for a group of channels whether they want them or not.

Sen. John McCain, R-Ariz., a longtime critic of rising cable rates, said Thursday that he thinks the FCC should begin an pilot program that would determine whether offering cable channels a la carte would benefit consumers.

A la carte pricing is becoming one of the hot-button issues in Congress as cable rates continue to rise faster than inflation and lawmakers come under pressure to slow the price hikes and give people more flexibility. Since Congress deregulated the industry in 1996, cable rates have increased by 53%, while inflation has risen 19%.

FULL ARTICLE HERE


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## Jacob S (Apr 14, 2002)

Cudos to McCain for trying to make a difference in the tv industry for consumers.


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## FTA Michael (Jul 21, 2002)

Jaw-dropping quote from that article:

"A la carte pricing is becoming one of the hot-button issues in Congress ... 'I don't hear as much about gay marriage and immunity for gun makers as I hear about the cost of cable,' Sen. Frank Lautenberg, D-N.J., said."

Keep in mind that one of the biggest proponents of a la carte, the Consumers Union, said in an earlier report that it's impractical to do a la carte tiers on analog channels. As cable systems upgrade to digital, this roadblock will go away, but it's good to remember that a lot of cable systems have physical problems in making ESPN optional.


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## ypsiguy (Jan 28, 2004)

Bell ExpressVu and Star Choice in Canada have theme based programming tiers. Why can't we? I think it would give people more choice.


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## Bogy (Mar 23, 2002)

ypsiguy said:


> Bell ExpressVu and Star Choice in Canada have theme based programming tiers. Why can't we? I think it would give people more choice.


I do on my digital channels.


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## Cyclone (Jul 1, 2002)

Yeah!! ala carte! Now we can get back down to only 40 available channels in a lineup again. There will be plenty of bandwidth for HDTV if this stuff passes. 

Do you really think that anyone is going to pay for ESPN Classics or Discovery Wings to keep them on the air?


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## Jacob S (Apr 14, 2002)

Not only do ExpressVu and Star Choice have somethinalg closer to ala carte but so does C-Band in a similar fashion. A new provider at 105.5 plans to do the same as well on the DBS platform. 

This affects about 85% of the U.S. population since that is the percentage that has cable or satellite, so this would affect most of the U.S. population. 

Perhaps this would lead to some of the channels that are not very popular dropping off, therefore leaving more bandwidth being available for better channels, HD, and more local cities. This may also force some channels to try to make their money off of advertising indirectly instead of off of the consumers directly through a monthly fee. Maybe this will encourage many channels to carry their channel for free if they can get enough from advertisements if their programming is better, enticing channels to have better programming available.


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## RichW (Mar 29, 2002)

Jacob S said:


> This may also force some channels to try to make their money off of advertising indirectly instead of off of the consumers directly through a monthly fee. Maybe this will encourage many channels to carry their channel for free if they can get enough from advertisements if their programming is better, enticing channels to have better programming available.


Huh? This is how most channels make money now... from ads, not subscribers.

The reason the programmers don't want to sell their channels ala carte is because of advertising. They tell their advertisers that "The Grass Growing Channel" is seen in 10 million homes. What they mean is that it is in the channel lineup for 10 million homes, even though only 3 people actually watch it.

The only problem I see with this is that some of the channels with a naroow interest, but good content, might get dropped because of lack of advertisers.


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## Marvin (Sep 14, 2003)

People will end up paying more money for fewer channels with a la carte, and some of the niche channels will go away. How does that benefit consumers?

Having had C-Band and the ability to do A la carte, its not all that its cracked up to be. The C Band provider I was (still am until June/July) offered packages as well as a la carte. Purchasing just the channels I wanted cost more than the package with those channels that I wanted and others that I didn't. They still packaged MTV and Nickelodeon channels together a la carte even though I didn't want MTV.


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## FTA Michael (Jul 21, 2002)

My humble guess: If it's done right, a la carte could actually help true niche channels.

Suppose someone wants to start The Chess Channel. Most carriers wouldn't take it for free, but if 100,000 chess fanatics want to pay $2/month for it, TCC could get half of that and be able to pay its modest bills.

Someone else starts Plumber TV. Nothing but helpful tips, call-in shows, product reviews and news just for plumbers. It's free to cable/DBS systems, who charge $1/month. Plumber TV may only have 20,000 viewers, but they're all definitely plumbers, so plumbing supply advertizers would be willing to pay enough to let PTV pay its modest bills.

The niche channels that would get hurt the most are the duplicates. Who's going to want to pay a quarter for the 10th home improvement channel? the 8th history channel? the 7th youth-themed channel? Some folks might, but not enough for the Procter & Gambles of the world to buy ad time.


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## RichW (Mar 29, 2002)

carload said:


> My humble guess: If it's done right, a la carte could actually help true niche channels.
> 
> Suppose someone wants to start The Chess Channel. Most carriers wouldn't take it for free, but if 100,000 chess fanatics want to pay $2/month for it, TCC could get half of that and be able to pay its modest bills.


Unfortunately, the market doesn't validate that guess. A real example is the Golf Channel. This channel is probably as close to my hypothetical "Grass Growing Channel" as it comes for us non-Golfers 

At one time it was only available ala carte (for 10 bucks/mo if I remember correctly) and appealed only to a few avid golfers and golf fans. As it became part of standard tiers, its ad base grew and is now more financially secure. Sure, many people who have that tier don't watch the Golf Channel, but many more people have accesss to that channel for ocassional viewing than did under the ala carte only offering.

I would suspect that the vast majority of viewers would prefer "buffet" pricing over "ala carte". Just as Intenet access and telephone services went from measured pricing to a fixed monthly cost, TV/video services with "buffet" pricing is more popular than ala carte. It is unreasonable to expect to pay a small fee for channels offered ala carte only. I suspect that someone interested in 15-20 channels ala carte will find that the cost will be more than buying them bundled with channels they don't care about.

That is not to say that I like the practice of forcing providers to bundle channels into the lower tiers. The best compromise I see is to have four of five different price tiers for consumers to choose, and letting the *carrier*, not the provider, determine which tier to put the channels in. There will still be some consumers who will be unhappy that one of their favorite channels is in the highest tier, but that is life!


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## narnia777 (Mar 28, 2003)

I would love to have choices about what channels I want, for example I pay over $67 per month for Dish Network, 2 receivers DHP, AT 180, Locals+supers+2 fox channels that I have waivers for. The only reason I have AT180 and not the AT60 is for channels such as Boomerang, Hallmark, Biography and Techtv. I would be happy with AT60 plus those 4 channels and would love to pay much less then $67. 

I will be switching to Directv to save money, TC+ plus locals with Directv Tivo is only $48, will be keeping Dish for supers and the 2 fox channels.

Still would like to save money and just pay for less channels but the channels I want.

Jim


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## Jacob S (Apr 14, 2002)

Yes, that is true that some channels would not be available in as many homes if they were done ala carte but if they had good enough programming and cheap enough rates then that should not be much of a problem since their ratings would go up as more people would order their channels and the viewership would go up. 

Why should we pay for a channel that we do not want everytime they decide to add another one without any real content that most of the people would not want to see, just so that they can have a reason to get more money by adding an unwanted channel by most people? The channel providers need to be rewarded for having good programming and having a good price for their channels by having more people wanting to buy their channel and collect more in advertisement, to get more viewers, not by forcing them down people's throats in a package making people pay for it whether it has good content or not, with the channel providers knowing they are getting paid for the channel even if the content is crappy and/or the viewership is not very good.


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## FTA Michael (Jul 21, 2002)

Jacob S said:


> Why should we pay for a channel that we do not want everytime they decide to add another one without any real content that most of the people would not want to see, just so that they can have a reason to get more money by adding an unwanted channel by most people?


If I can coax the meaning out of your question, I think it answers itself.

As you suggest, a lot of times carriers will add a channel or two to justify the carrier's already-planned rate increase. So in that situation, actually you aren't paying for that extra channel; you're paying the rate increase the carrier thinks it should add to maximize profits. The small percentage of the increase that goes to the new channel is just a smokescreen and is not the cause of the increase.


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## Guest (Mar 31, 2004)

Mark Holtz said:


> From Hollywood Reporter:
> 
> *McCain wants FCC to try a la carte cable pricing test*
> 
> ...


I like John McCain and he's trying to do something good here. That said, here's why it won't work.

It's legislation so there will be assorted waivers, add-ons and keep in mind, this is the same government that designs the tax code each year and gave us SHVA.

Then you have to design a system that works, good luck. It woul have to be something that all systems could handle. What about smaller systems still scattered around the country, compatability and software issues with the myriad of satellite and cable receivers out there.

Then ultimately, consumers will screw it up. They'll change preferences daily, hourly, won't understand it anyways in most cases or simply ignore it and stay with what they have.

Programmers will start calling the folks on their regular campaign donations lists, more changes and restrictions/waivers etc will be added, and like most legislation that gets out of congress these days, it will be a horse designed by a committe that ends looking like an elephant instead.

Waste of time.


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## Jacob S (Apr 14, 2002)

With DVR's becoming even more popular, and more people using them, people would end up watching fewer commercials, therefore getting less money from advertisers, then have to raise prices to make up for that, how much more is the question.


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## Danny R (Jul 5, 2002)

The way I see an ala-carte subscription system working is to have a basic tier of the most popular and requested channels that are available anyway. This is where your locals, news and usual basic tier fare go.

A new channel is added to this lineup automatically for the first year of its existence. Thus advertisers know it potentially is reaching a national audience, and this adds to the chance of success for the new channel.

After the first year, the channel is either dropped by the broadcaster, or bumped up into a higher tier. All higher tier channels can be independently ordered via ala-carte.

To make ala-carte even more of a success, a pay-per-view feature should exist for every channel as well, allowing one to watch it for a day for some small fee. Thus one time events the user just has to see on a network can be watched. With such a feature, ala-carte might actually become more profitable than the standard tier system in place now.


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## RichW (Mar 29, 2002)

The problem with making every channel ala carte, besides the basic cost, is the huge increase in administration and customer service it tasks to implement such a plan for millions of subscribers. The overhead costs would add to the price everyone pays. There may even be a technology problem as to how to authorize or deauathorize so many combinations of channels for every subscriber. 

Yes, you could make it a PPV or VOD service, but that is very expensive also.


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## FTA Michael (Jul 21, 2002)

I must disagree. With all its international channels, multiple locals, and other options, Dish already does a lot of a la carte.

1) The cost of administering the account would mainly be an increase in customer service. From a computing perspective, adding more options mainly means growing the customer database. It's not free, but spread over thousands or millions of customers, it's not very expensive either.

Customers could be charged for every a la carte subtraction, perhaps with an add-on charge for asking a human CSR to assist in the process instead of handling it online or with phone menus. Adding more channels is "free" because it increases the bill. It's pretty much what Dish does with its current menu of choices, and it can help customer service pay for itself.

2) The projections we're talking about with a la carte suggest that folks would pay close to what they're paying now, but for a lot fewer (albeit unwanted) channels. That means carriers would get close to the same amount of revenue but would pay less for channels few subscribers are buying.

3) Technology problem? Dish already authorizes and deauthorizes hundreds of channels for every receiver. It's true that analog cable systems would have a real problem, but digital receivers can handle the load.


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## Danny R (Jul 5, 2002)

Yup, have to agree with carload. Dish, DirectTV and most cable companies with digital channels already have independent settings for every consumer. One person subscribes to such and such channels, the other to another set. 

I would guess that this is already done on a software basis by channel, and NOT by tier. Probably just a simple data field that is stored in each user's database.


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