FCC Head Supports Ala Carte Cable

MikeyTheK writes "PC Magazine Reports that Kevin Martin, chairman of the FCC, supports ala carte cable. In a letter to several minority groups on Wednesday, Martin said "While I believe all consumers would benefit from channels being sold in a more a la carte manner, minority consumers, especially those living in Spanish speaking homes, might benefit most of all,". He goes on to argue "Cable companies act as gatekeepers into the programming allowed by the expanded basic cable package, preventing independent content producers from reaching viewers,", citing the example of Black Family Television, which was forced to go online-only because cable operators refused to carry it, even after it reached 16 million homes."

Translation

We think we can make a ton more cash by charging for each channel extra. Basically, what we're gonna do is reduce the nominal fee by a good 20 percent, cut channels in half and if you want anything but the propaganda, you'll pay extra.

We think that the average household will want about 80% of the channels they got today, generating about 120-130% of the revenue of today.

Re:

Naturally, but this might also point to cable companies' desire to stop pushing everything over coaxial at once and move towards a TV over IP system. It's probably cheaper to gain bandwidth by pushing out new cable boxes to everyone than digging and laying

Re:Translation

Yes, they'll make more... from the standpoint of lowering prices can induce more purchasing.

Take my situation for example:

I can spend $40/month for basic cable, which only gets me my already free over-the-air channels, 10 local public access channels, and 2 or 3 nation-wide basic cable channels (like WGN, CSPAN, and TNT).

I don't watch any of those additional channels, so what's the point?

In order to get the 3 or 4 extra channels I do want (Cartoon Network, Disney, Food, SciFi) I need to buy a $60/month package that gets me an extra 15-20 channels that I don't care for, simply because of how the pricing tiers are structured.

I would be more than willing to buy those 3-4 channels ala carte. I would pay $10/month for those channels as they are things I want to watch that I cannot get over the air. I am not going to pay $60/month (plus fees) to get those channels.

So, the cable company would get another customer, and make more money, by simply offering ala carte programming. I doubt I am the only person in a similar situation.

Alternatives? Satellite, but as a renter, I'm limited in what I can attach to the building, or buying programs individually on iTunes. Other than that, I don't have any legal options, so I just go without.

The same logic is used for music sales. Price an album at $16 and 10 people buy it, garnering you $160 in sales. Make the songs individually available for $1 and 200 people buy individual songs, garnering $200 in sales, simply by putting things in a different pricing scheme. Similarly, it's been noticed that people are more willing to spend $25/month on individual songs, than to spend $40 every 2 months on full albumns.

Re:Translation

Sounds like you need a better wife.

Re:Translation

Actually the reason we would have to pay more is because the stations that had guaranteed viewers will no longer be able to project how many viewers will view their channel. Which in turn means they can't support charging as much as they do for advertising time, so they'll want to collect the revenue from the cable provider which in turn would then pass the higher charges on to the consumer. A la carte viewing is not what most people would want, they bitch and whine about today's prices, imagine easily paying 300% more for far fewer channels. People really don't think before requesting things. There is some proposal to have the customer's credited the value for the missing channels against the current price of standard service, problem being that the price for standard would sky rocket because stations like BET, MTV, etc etc would charge the cable company more as mentioned above.

Re:Translation

I actually wouldn't mind paying more just for the satisfaction of knowing that not a penny of my money is going to Empty-V and it's vast array of clones, or all the ESPN channels. Currently, ESPN and Empty-V charge cable and satellite companies several bucks per subscriber, and require their "offerings" to be in the basic tier.

There are actually so few channels that have anything I'm willing to expend lifespan watching, much less pay good money for, that I'm pretty sure I will end up paying less. There is one (1) channel that I really want that's in Dish's top tier; if I could buy just that one separately, that alone would cut my monthly fees significantly.

I know what I'd get

Spike TV and one 'o them 'God' channels. Just to keep some balance.

And, as a nerd just why do I need 50.....

Why do I need to pay for others to have 50 sport channels? The SciFi (et al) channel works just fine for me, I don't want to have ESPN; which by talking to the cable companies is one of the most expenive "free" channels out there.

Re:And, as a nerd just why do I need 50.....

Agreed.

ESPN is a shining example of why bundled packages don't work. ESPN is one of the most expensive channels for cable and sat companies to offer. This is, in part, due to the huge costs associated with the acquisition of broadcasting rights for various sporting events by ESPN.

It is compounded by ESPN's growth model, which is to spawn more specialized sporting channels that they then shuffle semi-major sporting events to. This was done with ESPN-2 and is now being done with ESPN-U. (see here [scout.com]) So if I want more of the specialized channels *I* want, I end up paying more for ESPN channels I could care less about.

The icing on the cake is this - about seven years ago, I paid over $600 for an ATSC/DVB-S receiver in order to pick up HD stations. The sat provider that I went with offered several HD channels for free. Several more channels were added to the HD package over the years, but the cost remained the same. This continued until ESPN-HD arrived. Suddenly, I was asked to pay a small fee to continue to watch all of these channels.

I subscribed to it for a while, but why? Most of the programming on ESPN-HD was simply upconvered NTSC analog programming. So I dumped it. Kept my sat service for a few more months then dumped it completely. Now all I get are local channels, TBS, WGN and Discovery that come free with my cable company's digital cable package.

Both my cable co and my former sat company bombard me with offers for HD PVRs and several months of free service. Why? All of it except for one or two channels is nothing but junk to me. The only way for me to pick and choose is to get a C-band sat, which my HOA would never approve.

So in the end, this cartoon [photobucket.com] from the CSMonitor sums it all up...

The problem with a-la-carte...

The problem with a-la-carte pricing is that it makes it impossible for new networks to get enough subscribers to start up. Think about it - how many of us would personally watch LOGO, the Gay/Lesbian Network? Some, but not enough for it to survive without charging an insane amount per subscriber. How about a network like the old TechTV, or even G4? Most of us would, but most consumers wouldn't. Even networks that would appeal to everyone would have a tough time gaining ground once it went into effect. Would you call in to purchase a new network? Not unless it had a show you really, really wanted. You can make an argument that it should be based on who wants each network, and that you shouldn't pay for networks you won't watch, but I'd argue that package programming keeps the price down for all networks.

And a la carte solves the problem?

Television is still mostly paid for by commercials. Any channel not generating much viewership isn't generating much sales. Either that, or the target audience doesn't buy things as much.

Either way, a la carte would end up looking exactly the same...except probably with less variety, since channels that are currently not competing would start.

Of course, I'm with the majority, so it'd be great for me. USA, Cartoon Network, Sci-Fi Channel, and Comedy Central are my channels, and I know that they're all pretty popular. Then again...I wonder what's more popular. It could lead to more of that reality-tv crap infesting my channels. There are already full channels that run nothing else.

Cable are forced to package channels

The programmers, like Viacom, force cable companies to carry channels they don't want and therefore forced into package deals of today. Remember the brewhaha a few years ago between a satellite provider and programmer, that resulted a crawl text to all subscribers that there faverate channels may be dropped before they came to a deal.

Sounds great

I'd be happy to pay $1 per month per channel. I'd probably end up getting half as many channels as I do now while paying the same amount, but they'd be the [i]correct[/i] channels. I'd drop 30 channels I never watch and add 2 that I would.

Or, if they want to price the channels competitively, I'd be willing to work with that, too. I'll pay $4 per month for ESPN if it's so expensive, but I'm going to pick it up each August and drop it each January so I can just get college football. At $1/month for ESPN I wouldn't bother.

This doesn't make it hard for new channels to break in, either. Dish Network is always having "free preview weekends" for higher-tier cable and premium content. If you want to launch a new cable channel and get people interested, you might have to (*gasp*) give it away for free and rely only on your advertisement income or your startup capital before you gather a critical mass of viewers. Then, you can add a low monthly fee, and scale it up as your popularity continues to climb. Sounds fair to me.

Not to nitpick, but...

It's "a la carte," meaning "by the menu."

This will never happen

1. The content producers (TV networks) decide what they want to put on and tell the cable companies that it is a take it or leave it deal. If the cable companies puts up a fight they put a scroll in that says Your cable company does not want this channel call them to change their minds on the highest rated shows. They try to force high cost programming in to the lower tiers so everyone that has those tiers has to pay for it. The golf channel did this just before the US Open. It did not work. They are on a high tier package.
2. The cable provider will calculate what the cost to maintain the connection (and some profit and that will be broken out on your bill. Then each channel will be listed.
3. The number of channels will go down. Right now some networks run lower cost channels in the higher tier and subsidize it with a more popular channel. With out that subsidy there would never have been a History Channel for example.
4. The content providers will not let this go through, not the cable companies.

My order

Hi, what can I get for you today?

Yes, thank you, I'd like your High Speed Internet Access.

Ok, no problem, the half order or full size?

Full size; the one with 3mb/s down 712 up.

Do you need hardware or setup?

Nope.

Sure no problem, anything else?

Yes, I'd also like a few side orders?

Ok go ahead.

The local channel 17, Discovery Channel, Animal Planet, History Channel, Military Channel and AMC.

Anything else?

How much is your ESPN package?

4.95 per month.

No thanks

Would you like to try our HBO package? It's free for the first 3 months.

No thanks

Okay that's a Full size order of high speed internet for 19.95, plus 6 sides at .95 cents a piece. Anything else?

Nope that will do it for now.

Including taxes, fees and internet monitor labor, your total is $76.65.

WTF?!?!

From a Cable Operator's View...

I work in the billing department at a smaller cable company, so maybe this post is biased. At least it's biased in the direction of truth, rather than ranting consumer speculation. I also used to work as a field technician for the same company, so I am in a position to know this issue.

First, most cable and satellite companies would be contractually prohibited from complying with any such mandate from the FCC, if it were to be announced tomorrow. Viacom, HBO, Universal, Disney and the over-the-air corporations demand carriage of their lesser-known networks in exchange for a reduced rate on their main programming. For example, our customers demand - and we willingly pay - for ESPN and ESPN HD. The cost per subscriber per month is about $14. We also carry ESPN2, at a discount. If we dropped ESPN 2 from our expanded basic tier, the SD and HD ESPN channels would cost us $9/mo per sub. We are currently in month 4 of a 36 month contract at this rate. Thus, we cannot break this portion of the bundling in our lineup for the better part of 3 years.

Additionally, it is a simple fact that forced a la carte offerings would lead to higher customer cost, and reduced quality. Most cable companies continue to carry their basic tier in analog. A la carte analog results in a daisy chain of traps at the pole or pedestal, degrading the signal across the spectrum. A la carte digital requires equipment in customer's homes with remotely accessible security. You can achieve this with CableCards or Switched Digital. The two are not currently compatible, so it's an either-or situation. In all honesty, MY employer wants CableCards to work correctly. When they don't, it generates higher costs in the form of truck rolls, and lower customer satisfaction.

This is to say nothing of the increased cost due to the creation of rate codes in the billing software for each channel, and the corresponding training of 1700 CSSR's on how to use them. It also ignores the time/cost of converting 79,000 video subscribers to an a la carte plan, so on and so forth.

Kevin Martin has a lot of dreams, most of which seem to be based in fantasyland regarding cable companies. I would be happy to have him shadow me for a week to see how these companies actually operate, so he can realize the true costs of what he dreams up.

Re:From a Cable Operator's View...

And a couple of honest answers:

I've posted about CableCards before, and yes they DO work...when they work. When each piece of the system is compatible, CableCards work great. We have verified that our Motorola DAC will talk to our CableCards via our billing system, in a host with compatible firmware. Unfortunately, the host is the customer's TV/Tivo from any number of manufacturers. When their firmware is incompatible, or the proprietary guide doesn't populate, the cable co gets blamed for these problems. We do our best to solve many of these situations, even though they are not our responsibility. The original 1.0 revision of CableCards was capable of two-way communication, but Consumer Electronics companies decided not to utilize this capability. Link: http://www.opencable.com/primer/cablecard_primer.h tml [opencable.com] The older cards were single-stream cards, meaning they could tune a single channel at once. The newer revision which are preinstalled in our Motorola DCH's are M-Cards, capable of decoding multiple digital streams at once. Unfortunately for the consumers, CE manufacturers continue to build TV's that lack a diplex filter and other parts necessary for integrated 2-way functionality.

To drop analog cable would requires a digital tuner in or behind every TV in every home for our subscribers. We could go all-digital in a very short time, effectively eliminating ourselves as a competitor for those who can not purchase a new TV. We are currently working with Motorola to create a "dongle" style digital converter. The "mini-box" would be capable of being authorized on a channel-by-channel basis, using the removable security (CableCARD) currently mandated by the FCC, and still provide compatibility with older analog TVs. If we could get such a product for less than $100 cost per unit, we would order 20,000 of them tomorrow.

A la carte depends on all-digital, and it is technically feasible. There is a reason DISH Network advertises their content as all digital...on transmission it is, but once you hook up your sexy Dish HDDVR via regular coax and tune to CH 3 to watch, you're back on analog. However, the upfront AND longterm cost for cable companies to do so AND offer a la carte will be quite high, and like ANY business, cable companies will pass the increased cost to consumers. Additionally, contracts will need changed, something that will move at the speed of a jellyfish in January.

Re:

WHy is the ridiculous?
If I get 1/20th the content, I should pay 1/20th the price.
The market would drive it there eventually.Assuming it applied to cable and sat satellite and fiber.

Re:Populist crap.

Not to mention that the public has paid for much of the infrastructure in the form of tax breaks and public infrastructure allotments. They use our public easements, too. You build on the easements you serve the people. Period. Want to fuck the people? Go find your own easements.

Re:Populist crap.

Except that's not how it would work. Right now you basically pay for the marquee channels in each package and get the rest of the channels free as a bonus. If channels were un-packaged you wouldn't get HBO for 1/20th the price of a premium package. Instead you'd get HBO for 1/2 the price of the premium package and all of the other channels for something more than 1/20th. The total cost of putting it back together would be higher than what you pay now.

Why? Simple economics.

Let's say there's a cable package that has 20 channels including G3, HBO, and ESPN. Slashdot readers are willing to pay $20 for G3 but only $1 for ESPN and $0 for any other channel. Sports nuts are willing to pay $20 for ESPN, but only $1 for G3 and $0 for any other channel. And families are willing to pay $20 for HBO, but $0 for any other channel.

Right now the cable company could charge $20 for that package and all 3 groups would buy it. Everybody pays $20 and gets 20 channels.

If forced to offer it a la carte the cable company wouldn't sell HBO for $1. They'd sell it for $20 in order to capture the family market, who is willing to pay that much for it. Same for ESPN -- they can sell it for $20 and capture the jock market. Same for G3 - they can sell it for $20 and capture the techie market. Now everyone is worse off. The families, techies, and jocks are still paying $20 for cable, but getting fewer channels for their troubles.

You can question the empirical assumptions -- maybe the pricing breakdown isn't that extreme -- but bundling of goods has long been a means to allow people who value different parts of a package differently to enjoy the package for one price.

Re:

Too bad there's no in-between option, where to get the first channel it costs half of your current cable bill, and then each channel costs 7%-10% of your total now. That would mean that if you watch more than half your channels, stick with your current ser

Re:Black Family Channel

I thought Fox [fox.com], ABC [go.com], CBS [cbs.com], and NBC [nbc.com] were the (mostly) White Family Channels.

The Black Family Channel just happens to reveal their target demographic in their name.

Re:Black Family Channel

The ACLU defends Klansmen's rights to march protesting the "black vote" just as adamantly as it does African American people's right to vote.

Other than that, keep rocking the suburbs, the white american male is soooo discriminated against... boo hoo.

Re:They'll never do it.

No, I wouldn't pay 60 dollars for 5 channels...nobody would, that's why the price would fall.

None of the forecasting document I read indicated that it would be nearly this price. 50 cents, to a buck 50 per channel. Excluding HBO, et. al.

Set-up fee:Anywhere from Zero, to 50 dollars
min fee: 10 to 25 dollars a month.

With competition(satellite and fios) the prices will approach cost.