A la Carte Cable Pricing

Published March 2, 2008

FCC Chairman Kevin Martin recently proposed giving the agency power to mandate a la carte cable pricing, forcing cable companies to offer pricing on a channel-by-channel basis.

Those in favor of forced a la carte pricing contend it will result in greater consumer choice. Opponents note that government interference in the way cable companies price their services will have unintended negative consequences, ultimately forcing consumers to pay higher prices for fewer choices.

Mandatory a la carte pricing could, for example, subject the entire television industry to dramatic seasonal cable subscription changes. Some stations could lose millions of subscribers within weeks of a popular show ending, dramatically affecting ad revenue. Bundled services are preferred by the cable industry because of they tend to result in more stable revenue streams.

Consumers already have more choices in television services than ever before. In the U.S., virtually all television consumers have the option of over-the air broadcast television, at least one cable system, and two satellite providers. Competition in the delivery of video programming services has provided consumers with increased choice, better picture quality, and greater technological capabilities. Consumer choice has never been stronger.

Moreover, cable television companies already have the option to provide their services in an a la carte fashion. If consumers would truly be attracted by a la carte pricing, and if such a system were financially sustainable for a cable provider, then an enterprising company has much to gain by offering it.

The following articles provide background on the economic and legal problems that are raised in the debate over a la carte cable pricing.

Why A La Carte Cable TV Is a Nutty Idea
Fortune senior writer Marc Gunther explains that unbundling cable is all about politics, not about driving down prices for consumers.

The Constitution, A La Carte
Randolph May, president of The Free State Foundation, examines the constitutionality of the proposal to mandate a la carte pricing on cable companies.

Mandating A La Carte Distribution of Cable Pricing Would Harm Consumers
The National Cable & Telecommunications Association examines the inevitable consequences of a forced a la carte cable pricing regime.

Statement on FCC Chairman Kevin Martin’s Call for A La Carte Regulation
In a November 2005 statement released by The Heartland Institute, telecom policy analyst Steven Titch notes, “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.”

Moral and Philosophical Aspects of the Debate over A La Carte Regulation
Adam Thierer of The Progress & Freedom Foundation addresses the moral and philosophical debate over using government to upend an industry’s private business arrangements.

GAO’s Cable Report Smacks Down A La Carte Regulation
In this essay for the Cato Institute, Thierer analyzes the GAO’s 2003 report, “Issues Related to Competition and Subscriber Rates in the Cable Television Industry.”

Bland Menu if Cable Goes A La Carte
Joe Nocera of The New York Times explains some of the likely unintended outcomes from mandated a la carte cable pricing, including how it could raise prices and limit choice for many cable consumers.

For more information on cable regulation, including a la carte pricing, visit PolicyBot, The Heartland Institute’s free online research database, where documents on this topic are grouped at http://heartland.org/PolicyBotTopic.cfm?artTopic=643. If you have any questions about this issue or the Heartland Web site, you may contact Brian Cost, Heartland’s assistant director for government relations, at 312/377-4000 or at [email protected].