Cable groups attack pay-TV reforms

The US cable industry on Tuesday vowed to defend its practice of selling content to subscribers in bundles after media regulators proposed an overhaul that could dramatically alter the industry’s revenue model.

An à la carte pricing system, in which consumers can pick and choose the channels they buy rather than accept pre-set bundles of programming, was one of three proposals presented at Senate hearing on indecency on television.

Voluntary adoption would be “economically feasible”, Kevin Martin, chairman of the Federal Communications Commission, argued, alth-ough he stopped short of saying the FCC or Congress should make the proposals mandatory. His stance marks a radical departure from the policy adopted by the FCC last year under the chairmanship of Michael Powell, who said an à la carte regime would make pay-TV more expensive.

It drew immediate criticism from the National Cable Television Association, an industry group, which argued technology that allowed parents to block channels from being viewed in their homes was the best solution to concerns over indecency.

The industry fears Mr Martin’s proposals, including one option that would force cable and satellite companies to adhere to the same decency standards as network TV and another that would force companies to offer users a “family friendly” bundle, could make the cable companies’ revenues unpredictable.

An attempt by government to mandate how cable companies can sell their products would face vigorous legal opposition by the industry on the grounds that it was a violation of the companies’ constitutional right to free speech, Kyle McSlarrow, NCTA president, said.

The proposals, he said, were akin to forcing newspaper publishers to sell each section of their newspapers separately.

Last year a FCC a report on a la carte pricing concluded that the average household would pay up to 30 per cent more each month on its cable bills. This finding was taken up the cable industry to support its argument that the current model benefitted most consumers.

On Monday, however, Mr Martin insisted the study had presented “one side” of the argument, contained “problematic assumptions” and inaccuracies, and was “biased”.

Mr Powell, now a senior adviser at Providence Equity Partners, disputed those criticisms, insisting the findings had been validated by other investigations, including a report by the Government Accountability Office, the congressional watchdog. “Our initial going in instinct [before the report]…was that a la carte was a good policy. Our view was changed by the pursuasivness of the data,” Mr Powell said.

Blair Levin, an analyst at Legg Mason, said the FCC proposals would not significantly increase the risk that the government would require cable operators to offer a la carte programming any time soon. He said Congress would not impose the proposals for several reasons, including because the technical difficulties involved in overhauling the current system would lead to short-term price increases that were politically problematic.