A La Carte Cable

By Brian L. Clark

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Let s face it, the Bush Administration is not known for acknowledging mistakes. So when the FCC did a sudden about face last week and endorsed the idea of a la carte cable, it was, well, shocking.

A la carte cable has long been a pet issue of Arizona Senator John McCain, who plans to introduce legislation enticing cable companies into offering the option. Essentially, it gives consumers the opportunity to pay for only those channels they actually watch. On the surface, it makes sense. As someone who has digital cable, I can tell you that of the 300 or so available channels, my family only watches about 15 on a regular basis. What McCain and now the FCC are saying is that by allowing consumers to purchase only those channels, we ll save money.

After all, who doesn t want to save a little coin on their cable? Since 1996, rates have climbed 40 percent; the Wall Street Journal expects another 6 percent increase this year. That steady rise has led to lighter pockets for consumers at least in my household. A la carte, the FCC now says, would shave between 3 and 13 percent off my monthly bill.

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If one assumes the more popular cable channels cost between $4 and $6 each, it stands to reason my 15 channels would cost me between $60 and $90 a month $19 less or $11 more than I m paying now, respectively. However, that s for a mere 15 channels, so it doesn t sound like a bargain to me. The cable industry agrees. The American free enterprise system created the most diverse video programming on Earth at the best value for the customer, says Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association. The notion that government knows better how to improve on a competitive marketplace is not supported by the evidence.

What evidence, you ask? Well, in July of 2004, strategic management and technology consulting firm Booz Allen Hamilton conducted a study for the FCC that concluded:

A la carte pricing would result in higher costs to consumers for comparable access to cable programming.
Diversity would suffer because a number of innovative, smaller cable networks would be forced out of business before they had a chance to build an audience.

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At the time, the FCC agreed. Then last December, Booz Allen Hamilton admitted to a mistake in one of its calculations. The company amended the report but stood by its original conclusions. This time the FCC didn t. It said Booz Allen significantly underestimated the number of programming channels that a subscriber could enjoy under a la carte, and added that after correcting the mathematical error, consumers bills decreased by anywhere from 3 to 13 percent in three out of the four scenarios.

Other independent analysts take issue with the FCC s born again, pro-a-la-cart stance. Consumers don t realize how pricey their favorite channels would be on an individual basis, says Derek Baine, a senior analyst with Kagan Research. That s a big reason why a la carte failed dismally in Canada, France and other countries. In fact, the biggest pusher of a la carte, outside McCain s office, is The Parents Television Council, an ultra-conservative watchdog group based in Los Angeles that recently decried the fact there s, Too much profanity on American Idol. Far be it from me to be cynical, but could it be that Senator McCain, widely thought to be the Republican front-runner for the party s 2008 Presidential nomination, is throwing a bone to the base?

Let s face it, none of the aforementioned parties is really looking out for my interests. McCain wants to be president, the cable operators want to make as much money as corporately possible, and The Parents Television Council, well, they want everyone to think like they do. If Congress was really serious about cutting my cable rates, they d eliminate the monopoly cable companies enjoy and allow me to choose between my current provider and the one that has lines running directly behind my house to offer service two blocks up the street.

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Fat chance, eh?

Brian L. Clark is a reporter and consultant on all things digital, runs the The Tech Enthusiast s Network, and writes for Money,Men s Health, and Laptop.