Josh Gentry

What is not to like about A la Carte pay television. You only pay for the channels that you want, and nothing more. It works in Canada right now. So what are we waiting for?

Well Senator McCain, it's really not that simple...

A current proposal in Congress could reverse all the differentiation and large packaging of channels in the pay TV industry. The proposal, called “A la carte” or “Tier-themed” programming will offer consumers the opportunity to choose exactly what cable channels they will receive. Consumers will then only pay for those channels they have chosen.

A la carte television service was first proposed in the 90s and has gained very little momentum since then. Senator John McCain has been a big supporter of the proposed legislation since it was mentioned in Congress. The service is actually used in Canada and has some mixed reviews (MacArthur, 2006). A la carte service in Canada can be attributed to a lesser quantity of programming available in comparison to the hundreds of American channels available. In order to purchase individual channels via a la carte service in Canada, a consumer must first purchase a basic cable package. The basic package consists of about a dozen channels including all local and regional stations in both English and French, along with educational programming and a Canadian version of C-SPAN (Hennessy, 2004).

The Parent’s Television Council has praised the proposal because it allows parents to only pay for programming they feel their children can watch (Eggerton, 2006). Some of the more desirable children’s networks include Nickelodeon and Discovery Kids. In the majority of cable systems, the parents must buy an expanded service set in order to receive those channels. But those expanded service tiers come with a lot of potentially objectionable networks like MTV (Goldfarb, 2005). Another complain of parents is that they must go through the hassle of programming their set-top-boxes to block out objectionable programming, when they do not even want that programming to begin with (Goldfarb, 2005).

A la carte service has many opponents with their own lists of disadvantages. Even some cable networks who formerly offered their programming as a la carte offerings are now disapproving it. Disney experienced minimal success when it was offered as an a la carte option in the early 90s. The channel was sold at $12-14 per month. Disney did not achieve more than 30 percent penetration in pay TV households. Preston Padden, an executive vice president at Disney stated “We’ve been through a la cart. We know it doesn’t work” (Donohue, 2006).

If every consumer has a unique combination of channels, this will require much more work on the programmers end. This extra work raises costs for programmers and that cost is passed on to consumers (Goldfarb, 2005). Because of the complications of efficiency, only subscribers who select very few channels will notice a decrease in their cable bill. The average household watches 17 channels. The average household would then see up to a 30 percent increase in their cable bill (Goldfarb, 2005).

Another big problem with A la Carte is that many smaller networks will lose the audiences they enjoyed from being associated with a package. Lesser known networks with smaller target demographics like Oxygen and Hallmark channel will lose considerable revenues.

The future of a la carte service appears to be uncertain. There is a much larger opposing force coming from the cable industry than there is a supporting force from legislators. Until both sides can come to an agreement on whether the economics of a la carte service will actually benefit consumers, the proposed strategy will like remain at bay. The FCC will have to come to a unified conclusion now that its credibility on the issue is tarnished because of changing is position various times.

Donohue, S. (2006). 'Carte’ Foes Fight Back. Retrieved April 2, 2006, from http://www.multichannel.com/article/CA6317032.html?display=Search+Results&text=a+la+carte

Goldfarb, C. B. (2005). Cable and satellite network tiering and a la carte options for consumers (No. RL32398): Library of Congress.

Hennessy, M. (2004). Remarks by Michael Hennessy President and CEO Canadian Cable Television Association Washington Metropolitan Cable Club. Retrieved April 11, 2006, from http://www.ncta.com/press/press.cfm?PRid=510&showArticles=ok

MacArthur, P. (2006). Cable and broadband communications. In J. Gentry (Ed.). Bloomington.

Posted by Josh Gentry at 11:46 PM | Permalink | Comments (0)

One of the more well known court cases of our industry is the National Cable and Telecommunications Association's court case with Brand X. The main idea behind the case was as follows: Should broadband cable be classified and regulated as an information service like other internet service providers? Or should it be administered in the same manner as a telecommunications service like telephone service is?

Internet service started growing and developing in the early 1990s. The FCC did not have a major effect by acting on the new technology until it attempted to define the service in the Telecommunications Act of 1996.

Telecommunications services would be defined as either a Title II common carrier telecommunications service, or a non Title II information service. According to the court case of NCTA vs. Brand X, a telecommunications service is "the transmission, between or among points specified by the user, of information … of the user's choosing, without change in the form or content of the information as sent and received ("NCTA vs. Brand X", 2005).”

An information service is defined as “’the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications . . .("NCTA vs. Brand X", 2005)’” The overlapping characteristics of these services cause the biggest controversy of the issue.

Brand X Internet Services is an Internet Service Provider (ISP) that sought to interconnect with cable broadband internet providers by purchasing access at low rates regulated by the government. Brand X is a proponent of the keeping broadband cable providers classified as common carriers in order to benefit from the low rates and high quality facilities. Brand X filed suit in 2003 against the FCC’s 2002 ruling to deregulate cable modem service. The case took place in an appellate court and received a favorable decision for petitioner; the FCC’s decision was overturned (Hearn, 2005a).

In April of 2004, the NCTA filed an appeal with the Supreme Court, based on this case, and received backing from the Justice Department and the FCC. The appeal was granted, and on June 27, 2005 the Supreme Court decided in favor of the original ruling by the FCC, declaring cable internet service an information service and not subject to title II regulations("NCTA vs. Brand X", 2005).

One of the main ramifications of this court case is that broadband cable providers are no longer required to share their facilities with their competitors which would have allowed more competition. Another outcome of this ruling is a precedent of deregulation set for other broadband internet service providers. Companies like Verizon and AT&T provide broadband internet service through digital subscriber lines (DSL).

Hearn, T. (2005a). Access Denied. Multichannel News Retrieved February 7, 2006, from http://www.multichannel.com/article/CA623062.html?display=Search+Results&text=brand+X

NCTA vs. Brand X (Supreme Court of the United States 2005).

Posted by Josh Gentry at 11:31 PM | Permalink | Comments (0)