FCC to Cable: Offer Individual Channels

The big FCC news today is a Wall Street Journal story reporting that the commission will soon suggest that cable companies offer their channels individually. A recent FCC report says that consumers could save money if they have the ability to choose which channels they want. The FCC is also pushing for themed tiers of channels allowing a customer for example to opt for a family-friendly tier.

Of course the FCC is not able to impose its will on the cable industry but such suggestions could embolden politicians to follow up on these recommendations with laws.

The cable industry argues that if many viewers were to drop channels aimed for example at children, the cost for these channels would have to rise for other consumers. Furthermore it may be possible that less money is available for the programming of such channels.

The problem here is that the channels with less interest are being subsidized by others that people want. Whenever this happens, there is waste that can be squeezed out of the system.

When I hear arguments like this it reminds me of the telecom market and how illogical the pricing structure of the industry has always been. For example having local calls that are usually free, interstate calls that are inexpensive and intrastate calls that are expensive just never made sense.

It just so happened that VoIP was able to take advantage of such screwed up pricing models and use it to its advantage. Now, ILECs have fixed rate pricing for all your calls.

I think the FCC is doing the right thing and it is in the consumer’s best interest to be able to purchase as many or few channels as they like. I also think that we will see more and more broadcasters beginning to stream their channels directly and bypass cable companies altogether.

When you look at the competitive environment, there is satellite, ILECs and the studios themselves. The one advantage the cable companies have is the access to large quantities of programming. In fact ILECs are at a disadvantage when offering programming as they don’t have access to all this content today.

The question is, will offering channels individually bring more business to cable companies or less? The answer may be more. I don’t have reams of research to support my opinion but past experience tells me that consumers given choice become happier with the company they are dealing with.

That is in the short term. In the end the TV distribution companies are going to have to fight it out with the content providers themselves. ESPN for example is in a position to become its own distribution company. Since they are owned by Disney, this is all the more reason for Disney to start dabbling with providing more content direct to consumers.

And herein lies the concern for cable companies. Imagine if the content providers realize customers are willing to pay a certain amount of money each month for their content. They of course may decide to offer the content themselves and eventually bypass cable companies altogether or offer the cable companies the same content at ridiculously low margins.

  • VoIP Blog - VoIP News, Gadgets
    November 29, 2005 at 11:12 am

    FCC wants ala carte TV channels

    I heard on WABC talk radio this morning that the FCC wants cable companies to offer TV channels "ala carte" to give consumers more choice. Considering how harsh I was on the FCC’s e911 requirements this morning, I have to…

  • Mike Lundblad
    December 9, 2005 at 4:45 pm

    I’m surprised the FCC would propose a la carte. Why? The a la carte would kill they’re need to control/regulate cable programming. If the consumer had to pick they’re programs (non-bundled) then there would be no need to have restrictions on program content. Meaning, the consumer makes a choice on the content they want in they’re home. Cable companies/programmers should have jumped at this chance to get the FCC off they’re backs.

  • Dave Joyce
    May 12, 2006 at 7:50 pm

    The problem is not the regulations, it is the program providers. ESPN charges cable companies close to $3/ subscriber/month and also requires weekly cable reports to show to advertisers how many homes they visit. If you want their content you must show it to all comers or they don’t want to play. If the real numbers of watchers was shown to advertisers the fees would have to drop. A la carte is a real threat to them.I have seen things from a small cable providers point of view. In rural America, the consumer does not earn urban incomes but is expected to pony the same weight when it comes to programming costs. Now the local broadcast channels (ie NBC/CBS) want $0.50/ subscriber/month to be able to rebroadcast Digital content. HDTV is there too, but only from 7-10pm. To show the big four the cost of cable just went up by $2 just for content nevermind the millions spent for the infrastructure.A la carte would empower the consumer which is exactly why the government won’t get involved, because the $50/month consumer has a small voice compared to 100 million forced subscriptions time $3 per month ESPN has in its’ pocket.In closing, I don’t think it is the cable industry who needs to be forced to do a la carte, it is the video providers!

  • Rich Tehrani
    May 14, 2006 at 7:42 pm

    In theory, allowing subscribers to see the cost per channel would enable real competition in the market. Here is an example for your perusal. Let’s say ESPN charges $3 per month and bids $10 million to broadcast some special sporting event. Another content provider may feel they have the ability to get more viewers since they will charge less per subscriber but at the same time they offer up $11 million for the rights to broadcast.
    The point is if we can buy channels individually then the content providers will truly have to win based on having the best content.
    The challenge here is that some channels have a monopoly position in the market. Over time that could erode. Just look and see how the major networks have lost viewers over the past decade.

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