Study Finds Savings in Cable Choice

Letting cable and satellite TV customers choose the channels they want could cut their monthly bills by as much as 13%, according to a federal report released Thursday.

The report from the Federal Communications Commission bolsters backers of a la carte pricing, who want the pay TV industry to give viewers more control over what comes into their homes.

But cable operators and network owners countered that this sort of dim-sum approach to channel lineups would result in higher prices and fewer choices.

Most cable and satellite packages are sold as bundles. So if a customer wants, say, ESPN, he or she also must subscribe to Lifetime and HGTV. A 2004 FCC study concluded that allowing customers to subscribe to individual channels would drive rates up.

Thursday’s revised report “throws down the gauntlet of where the FCC wants the industry to be,” said analyst Jessica Zufolo at research firm Medley Global Advisors in Washington.

Support for a la carte pricing has grown alongside calls for tougher regulation of indecent programming.

Sen. John McCain (R-Ariz.) said he would introduce legislation soon to “entice” pay TV providers to offer a la carte choices along with other packages, or tiers, of channels.

“The report confirms what I have believed for years: If consumers are allowed to choose the channels their families view, then their monthly cable bill will be less,” McCain said. “Choice is far preferable to being forced to buy a host of channels they don’t even watch.”

Cable operators and network owners said that a mandate to provide a la carte pricing would stifle diverse programming, raise costs and put small operators out of business. Smaller channels count on being included in programming packages to gain audiences.

“People will know that BET is Black Entertainment Television, but they got to know it through channel surfing,” said David Honig, executive director of the Minority Media and Telecommunications Council, a public interest and civil rights group. “There are many channels -- TVOne, SiTV, AZN -- whose presence depends on the availability of a mass audience.”

Giving consumers their choice of channels “could represent the death knell for much of the wholesome programming available today from smaller independent channels like the Inspiration Networks,” said Rod Tapp, an executive at the religious programming company.

Even big entertainment companies can have difficulty finding an audience if people are forced to pay for channels individually.

“Disney Channel was once offered a la carte, and only a privileged few bought it despite the strength of our brand,” said Ben Pyne, president of affiliate sales for Disney and ESPN, both owned by Walt Disney Co.

The industry’s trade group, the National Cable and Telecommunications Assn., contended that the market, not regulators, should decide video offerings. “It is disappointing that the updated

The FCC, on its own, has no authority to order a la carte pricing, though it can squeeze other parts of the regulatory system to get what it wants.

Decency controls, for instance, are reported to be a major issue in the FCC’s approval of the $17.6-billion sale of Adelphia Communications Corp. to Comcast Corp. and Time Warner Inc.

Thursday’s revision contradicts the basic conclusion of the FCC’s first report, which was sent to Congress in November 2004. That report, endorsed by the cable TV industry, said that a la carte pricing would increase marketing and operating costs for cable companies, reduce revenues of network owners and provide little economic benefit to customers.

But Kevin J. Martin, who ordered a thorough review after becoming FCC chairman last spring, said in a brief statement that he was concerned about the conclusions reached in the initial report. The revised version, he said, found that the first one contained “mistaken calculations,” relied on “unsupported and problematic assumptions” and presented an “incomplete analysis.”

Public advocacy group Consumers Union praised Martin and McCain for “striking at the heart of the cable industry’s flawed pricing scheme.” And the major phone companies, which are starting to provide pay TV programming, have said they plan to offer a la carte pricing.