FCC's Martin resurrects 'a la carte' proposal, content providers respond

While Congress looks into the strange way the FCC chairman advanced his first, failed attempt to inject channel-by-channel programming into US law, cable programmers set up a proactive defense against a possible second attempt.

During his regular testimony before a US House Appropriations Subcommittee last Wednesday, Federal Communications Commission Chairman Kevin Martin happened to be asked whether he would still favor a move toward an "a la carte" programming arrangement for cable systems. Chairman Martin responded, as first reported by Multichannel News, by saying he remains a vehement supporter of the idea.

It was then that lawmakers learned that Martin has been floating around a new idea, a possible second means of making a la carte the law of the land, after his initial effort went down in defeat, even to the relief of his fellow commissioners, including Republicans. Martin's original plan was to invoke a little-known clause in telecommunications law that would enable the FCC to undertake an extra degree of oversight, but only when cable systems with 36 or more channels could be shown to be available to 70% or more of US subscribers.

When the data Martin cited as proof of such a state of affairs proved suspect, Congress began investigating the affair last month. Now, the chairman may have found another way around the problem, proposing instead of allowing CATV operators to let customers pick and choose their channels, that operators be allowed to eject channels from its programming tiers whenever their programmers raise rates by too high an amount -- according to Multichannel News, by 75 cents.

While that isn't exactly a la carte, since it would be the cable operators who get to exclude channels rather than the subscribers including them, that exclusion is being perceived as a potential backdoor for subscribers to exclude channels as well -- a possibility made more apparently likely by Martin's having explained it himself as an a la carte proposal.

The reason all this matters in the context of the Internet may not be obvious at first: Opponents of a la carte suggest that implementation of such a plan would incur costs that, inevitably, the consumer must pay. A rise in CATV service fees may negatively impact broadband adoption in this country. A recent study projects that 53% of US households have Internet connections, with 72% of those being broadband. Of those, 54.6% are supplied by cable TV services, with most of the rest supplied through telecom carriers.

While that preponderance in CATV's favor is appreciable, it's a slight tipping of the scales. If for some reason the balance were to tip the other direction, in favor of telecom carriers, broadband Internet service could be more strictly regulated by the FCC. As it stands now, the Commission's hands are largely tied with regard to how it regulates cable TV service, as demonstrated by the failure of a la carte itself the first time. But simply by virtue of the way the laws stand now, the FCC has a firmer hand in regulating telecommunications services; and if broadband Internet were largely a telco affair, then the transactions that take place on those services -- and here we're talking commerce -- could conceivably fall under closer government scrutiny.

In an ex parte filing with the FCC yesterday (PDF available here), the chief executives of Disney Media Networks, MTV Networks, Turner Broadcasting, Universal Television Group, and Fox Networks Group addressed Chairman Martin specifically, arguing that his proposal would result in less consumer choice and higher costs to the consumer.

"Specifically, your proposal would result in popular networks that consumers expect to be widely available being stripped out of the expanded basic service," the TV chiefs wrote, "thereby forcing consumers to pay an extra charge to watch them. As your comments make clear, government intervention into wholesale or retail programming decisions inevitably leads to price controls. Moreover, the perverse result of your proposal is that the most successful and most watched programs and networks -- typically those that invest the most in quality programming -- would be penalized for their popularity to the detriment of consumers."

The implication there is that popular channels would naturally be more expensive for operators to carry, and once they'd crossed some popularity threshold, operators would be free to exclude them because they'd grown too expensive. But as Multichannel News points out, it's ESPN which has typically been asking the highest premiums for basic cable service lately. Not coincidentally, it's two executives from Disney -- ESPN's parent company -- co-chairpersons George Bodenheimer and Anne Sweeney, who signed their names to the ex parte filing yesterday.

Last Wednesday, the industry publication noted, Rep. C. A. "Dutch" Ruppersberger (D - Md.) responded to Chairman Martin's reaffirmation of a la carte by advancing the CATV programmers' theory that the cost of enabling operators to sidestep rising fees would eventually be passed onto consumers, who would eventually become precluded from seeing the very minority-produced programming that Martin claims he's trying to save. "That's the other side of your a la carte," Ruppersberger told Martin.