Communications Commission (FCC) Chairman Kevin Martin caused a stir
recently when he said that cable television firms should offer
customers more choices about what channels they receive, including
the ability to buy channels one at a time, on an "a la carte"
basis. Martin's proposals come in response to the concerns of the
many American parents who are increasingly worried about what their
children are seeing on television. Their concerns are
understandable. And Martin's goal-giving viewers more choice-is a
good one. How that goal is achieved, however, is the critical
issue: policymakers should remove barriers to competition in video
services that prevent greater choice rather than impose new
Television is not
what it used to be. Twenty years ago, most American homes had
access to only a handful of channels. Today, thanks to new
technology, viewers may choose between dozens or hundreds of
channels. And while the programming of twenty years ago was aimed
at the mass market and carefully screened for all audiences,
today's television provides a broad variety of content directed at
different ages and tastes. That is a great advance for consumers,
but has made life difficult for parents who want to keep
inappropriate or offensive programming out of their homes.
While FCC rules
ban indecent content from broadcast television, they do not apply
to cable and satellite programming.
Chairman Martin's recent proposals are intended as an alternative
to this kind of direct content control for cable television.
Instead of content restrictions, he wants cable firms to increase
individuals' ability to choose the television programming that
enters their homes.
In a statement
before the Senate Commerce Committee, Martin put forward two ideas.
First, cable firms could offer a separate tier of "family-friendly"
programming. The cable industry quickly announced plans to do this,
although these plans have been met with some skepticism over
content, price, and, ultimately, control.
and more controversial proposal is that consumers should be able to
choose channels on an individual, or "a la carte," basis. Under
this approach, subscribers would be able to forgo choosing a
programming package and instead buy only those channels that they
want to receive.
that his recommendations are for voluntary action by cable
providers, not government mandates. At the same time, he left open
the door to regulation, stating, "If cable and satellite operators
continue to refuse to offer parents more tools such as
family-friendly programming packages, basic indecency and profanity
restrictions may be a viable alternative that should be
desire for greater control over television programming be met
without regulation? Clearly, it can. Already, substantial parental
controls are available. Cable subscribers with set-top boxes, for
instance, can easily block particular channels with a few remote
control clicks. Those with digital set-top boxes (soon nearly
universal) can block individual programs by date and time, or even
Further advances in technology will empower subscribers even more,
perhaps allowing screening by specific language or visual
Some argue that
this is insufficient because subscribers still must pay for all the
channels in a package, regardless of how many they block, and thus
subsidize content that they find objectionable. This has led to
calls for a la carte purchasing of cable programming.
The A La Carte
Would an "a la
carte" programming system leave consumers better off? Martin argues
that this is a basic issue of consumers' right to choose. Bundling
together content is unnecessary, he says, pointing out that the
New York Times, for instance, does not come exclusively
bundled with the Wall Street Journal-each can be purchased
separately. Yet, the business section of the Times does come
bundled with the sports section. Whether bundling makes economic
sense and benefits consumers varies from case to case and market to
In the cable
market, the predominant view has been that bundling is beneficial.
Allowing consumers complete control over channel selection can be
expensive, at least with current technology. The economics of
advertising are an even more significant factor in determining what
cable choice might cost. Cable providers and programmers earn
revenues not just from subscriber fees, but also from advertising.
Advertisers demand some assurance that someone may be watching
their ads. In part, this is because Nielson surveys of
cable-channel viewership are spotty at best for many cable
channels. Tiering helps to guarantee that a large number of people
will at least have access to each channel and thus to the
commercials on those channels. Under a la carte pricing, the number
of people with access to any particular channel would decrease,
threatening advertising revenue. The result would be higher rates
Moreover, because the audiences for new and niche channels would
fall the most, the number of program choices available to consumers
would also be reduced. For these reasons, both the Government
Accountability Office and the FCC itself have warned against limits
on cable television's ability to package programming.
and others, however, challenge this view. They argue that the
negative effects of a la carte are exaggerated, and that a la carte
and other pricing systems could be implemented without raising
prices, especially for customers of digital cable service.
At least one cable firm, Cablevision, agrees, though the bulk of
the industry does not.
Who is right? No
one knows for sure. It is clear, though, that policymakers are
poorly placed to pick winners and losers from among business
models, especially in quickly changing high-tech markets. These
questions are best answered in the marketplace, with rival firms
testing alternative ways to serve consumers.
A New Set of
The good news for
parents and other consumers is that a set of new competitors to
traditional cable providers is now emerging and is well positioned
to offer enhanced control of content to consumers. This competition
comes primarily from two firms that formerly offered only telephone
services, Verizon and AT&T.
In recent months, Verizon has begun to offer video service to
consumers in several cities, and AT&T will do so shortly. Both
employ an Internet-based technology known as "Internet Protocol
Television," or "IPTV," that allows consumers great control over
what they see on television. Users can pause and playback video and
order video on demand, which is programming selected individually
from a menu.
also promises to further enhance parents' ability to protect their
children. AT&T's service, for instance, would allow parents to
block or filter programs using their cell phones, even if they are
far from home.
More broadly, the service could make a la carte pricing more
feasible by reducing the cost of offering individualized channel
lineups. In addition, the technology may be able to provide more
and better information to advertisers as to which shows are being
watched, thereby reducing the advantages of channel packaging.
firm now offers a la carte service or a family tier, both are
considering these options. A spokeswoman for AT&T recently
stated that if "consumers want a la carte programming, we will be
happy to offer it, so long as we are able to obtain access to the
programming in that manner."
AT&T's marketing strategy, in fact, seems to be to win over
customers by providing more choice. As the spokeswoman explained,
"Our goal is to provide more choices to our customers when they
want it, in the way they want it."
This would set up a clear marketplace contest between different
ways of providing video service-to the benefit of cable
obstacles that new entrants seeking to offer a la carte service
will have to overcome. One, hinted at by AT&T, comes from
content providers. Media firms that own cable channels, such as
Disney and Time-Warner, are expected to resist a la carte pricing
for fear that their less-popular channels would lose viewers and
cable-system placement. As a result, a new entrant with an a la
carte business model might find it difficult to obtain programming
for a la carte sale.
needn't be an insuperable barrier. Instead of the potential
audiences that the current system provides, new forms of
compensation could work: increased cash payments, explicit audience
guarantees, or risk-sharing arrangements. If all else fails, the
new entrants could obtain independent programming or even create
new programming of their own.
Removing Barriers to
A second set of
barriers facing new entrants stems from the government itself.
Under current law, any new cable television competitor must receive
a franchise from local cable officials before offering service,
typically a slow and cumbersome process. So far, such approval has
been granted in only a handful of jurisdictions. Completing the
process in the thousands of remaining jurisdictions could take
years, and there is no guarantee that the new entrants' franchise
applications would be approved in all areas.
By lowering this
barrier to entry, policymakers would boost competition and enhance
prospects for increased consumer control over television content.
Several bills now pending in Congress would streamline or eliminate
local franchising procedures. For example, S. 1504, proposed by
Sen. John Ensign (R-NV), would eliminate local franchising
Other bills, such as S. 2113, proposed by Sen. Jim DeMint (R-SC),
would strictly limit franchising authority. In addition, the FCC
itself could act because existing law already prohibits localities
from unreasonably refusing to grant a franchise. In early November,
the Commission started a formal proceeding to determine whether
current franchise procedures violate this requirement.
The concerns that
many parents have about the content of cable programming are
understandable. The best way to give consumers more control over
that content is not new regulation, but new competition. The entry
of new competitors, however, is slowed by unnecessary regulation.
If policymakers want to help families and other cable consumers,
they should reduce or eliminate these barriers, thereby making
possible greater choice for viewers.
L. Gattuso is Research Fellow in Regulatory Policy in the
Thomas A. Roe Institute for Economic Policy Studies at the Heritage
Federal Communications Commission, "In
the Matter of Implementation of Section 621(a)(1) of the Cable
Communications Policy Act of 1984 as amended by the Cable
Television Consumer Protection and Competition Act of 1992," Notice
of Proposed Rulemaking, MB Dkt. 05-311, November 3, 2005, at