Statement on FCC Chairman Kevin Martin’s Call for ‘a la carte’ Cable Pricing

Published November 29, 2005

(November 29, 2005 — Chicago, IL) Federal Communications Commission (FCC) Chairman Kevin Martin has endorsed “a la carte” pricing of cable TV channels.

The following statement in response to Martin’s endorsement can be attributed to Steven Titch, senior fellow – IT and telecom policy for The Heartland Institute, a 21-year-old nonprofit research organization based in Chicago. Titch can be contacted for further information by telephone at 281/571-4322 (office) or 312/925-0464 (cell), or by email at [email protected].

The decision by FCC Chairman Kevin Martin to endorse “a la carte” pricing of cable TV channels amounts to another policy disappointment from an FCC that seems only nominally committed to letting market forces govern what is now a competitive market for broadband services.

In calling for a la carte programming, under which cable companies would make individual cable channels available independent of bundled programming tiers, Martin went against the FCC’s own finding just last year that a la carte pricing would not lead to lower prices or greater programming diversity.

Martin now says the earlier FCC conclusions have been “revised.” We await the compelling new data that fueled such a dramatic policy reversal.

Interestingly, Martin’s reluctance to mandate a la carte programming outright is a key concession to the economics of cable programming. ESPN costs $2.50 per customer, while other channels, like the Cartoon Network, can be as low as 15 cents. Tiered service bundles allow cable companies to spread costs while providing an outlet for niche channels.

Competition stands to add another dimension. Phone companies are entering video, and TV programming is becoming available via the Internet. Competitive pressures might force broadband entertainment providers to restructure rate plans and bundles. Some bundled family tiers may yet emerge.

The FCC would do better to let this play out in an unencumbered market. The FCC got it right the first time: Government meddling in cable service won’t work.

Steven Titch ([email protected]) is senior fellow – IT and telecom policy for The Heartland Institute, a national nonprofit organization based in Chicago. Among other publications, Heartland publishes IT&T News, a monthly newsletter addressing technology and telecommunications policy issues. For more information, call Ralph Conner, public affairs director, 312/377-4000, or email him at [email protected].