McCain: Cable Consumers Deserve Choice, Fair Pricing

Image: McCain: Cable Consumers Deserve Choice, Fair Pricing

Thursday, 10 Oct 2013 02:12 PM

By Jennifer G. Hickey

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With congressional attention focused on the government shutdown and debt-ceiling battles, other legislative matters have largely been placed on the back-burner — including a bill that would have allowed greater choice for cable TV consumers.

Republican Sen. John McCain introduced a bill in May to undo the bundling of channels into cable packages and allow consumers to opt for an "a la carte" plan. McCain was joined by Democratic Sen. Richard Blumenthal of Connecticut as a co-sponsor in July.

"Consumers should not have to pay for television channels they don't want to watch, and deserve the option of purchasing channels individually," McCain said at a press conference.

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Blumenthal agreed, saying, "The current antiquated, antidemocratic system imposes all-or-nothing cable packages that give consumers no control over their cable bill and prevent subscribers from voting with their feet when they are unhappy."

But the bill — the Television Consumer Freedom Act — has languished since being referred to the Senate Commerce, Science and Transportation Committee.

Legislative action had been gaining some traction as a perfect storm of price increases and several high-profile blackouts brought cable customers' dissatisfaction to the forefront.

A recent PriceWaterhouseCoopers survey that found 73 percent of consumers would prefer an a la carte system or, at least, greater choice in programming than is presently available.

In February, Cablevision set the ball rolling by filing an antitrust suit against Viacom claiming that it was illegal to force cable operators to feature "lesser-watched" channels, such as VH-1 Classic.

And last month, DirectTV CEO Michael White said that due to increasing content and retransmission fees, consumers would experience a price increase. Retransmission fees — the price a satellite or cable company pays broadcast networks to carry their programming — have increased sevenfold since 2010.

American Cable Association President Matthew M. Polka tells Newsmax that the complexity of the current system does not lend itself to an easy fix and that "the laws and regulations that apply to technology today are woefully out of date and some manner of deregulation is definitely needed."

Media consolidation, dominance by major broadcasters, and the high-cost premium sports channels are several of the reasons that consumers will continue to see prices rise, Polka said.

"No question our members will tell you that for all the channels that they pay a fee to carry, the absolute highest cost of any channel are your sports channels, which are about $5 per subscriber per month," he says.

According to a January 2012 Newsweek article, ESPN charges roughly $4.69 per household per month compared with TNT, the second most expensive channel, which costs $1.16. This matters to consumers because regardless of whether a user watches ESPN, they must pay for it.

ESPN's dominance is being challenged by emerging networks and competition for the market share is certain to impact consumers and cable operators.

For example, Fox Sports has growing influence on the playing field because it owns regional sports channels around the country and is now challenging ESPN in the national market with the just-launched Fox Sports 1.

ObamaCare: You Can Win With The Facts

Cable operators, consumers, and broadcast networks may disagree on the appropriate solution to rising costs, but there is almost unanimous agreement that there is a need to bring the regulatory system in line with a marketplace that has changed dramatically since Congress last acted two decades ago.

If any measure embodies the law of unintended consequences it is the 1992 Cable Act. The intent of Congress was to promote diversity and ensure cable operators could expand their availability and content selection to the benefit of consumers.

The act prohibited cable operators from charging local broadcasters to carry their signal and awarded authority to broadcast stations to grant or deny permission for cable operators to carry their signals and to charge those operators a consent fee.

After 1992, if a cable operator refused to pay the consent fee (which is set by the broadcasters and varies according to the channel), a broadcaster had the option of refusing to allow their stations to be broadcast, meaning a blackout for consumers.

With the Senate bill failing to gain traction, a better bet for action could come in the House.

Democratic Rep. Anna Eshoo of California is currently circulating draft legislation to reform the retransmission consent regulations, saying that as many as 91 markets were impacted by blackouts in 2012.

Eshoo's bill, like the McCain-Blumenthal Senate bill, contains provisions to limit cable bundling. Eshoo said her draft bill is "intended to spur constructive, actionable debate on ways to improve the video marketplace for video-content creators, pay-TV providers and, most importantly, consumers."

The Video CHOICE Act would give the Federal Communications Commission explicit statutory authority to "grant interim carriage of a television broadcast station during a retransmission consent negotiation impasse," so consumers would not be impacted with station blackouts. It also instructs the FCC to study whether blocking broadcast station's content during negotiations "constitutes a failure to negotiate in good faith."

A House aide with intimate knowledge of the draft bill says the focus is on generating support for the draft before formal introduction and that all avenues are being considered, including attaching it to another bill, to ensure passage.

Another House aide, who spoke on the condition of anonymity, tells Newsmax the Satellite Television Extension and Localism Act (STELA), which expires at the end of 2014, is being eyed as a possible vehicle for Eshoo's bill.

Whether an a la carte system would benefit consumers is unclear. According to Adam D. Rennhoff, an associate professor of economics at Middle Tennessee State University, consumers might not see greatly discounted bills under an a la carte system because the cost of an individual channel could increase by approximately four times its current level.

Furthermore, according to a July analysis by Needham Insights, an a la carte system could dramatically impact the survivability of smaller channels. The analysis estimates that only 20 channels would survive.

Urgent: Should GOP Stick to Its Guns on Obamacare? Vote Here.

That is the argument made by cable executives, including Brian Roberts of Comcast cable. He recently told PBS that consumers likely would not pay for smaller channels, like PBS or C-SPAN, that generate little revenue.

"There are many channels, whether it's Discovery Channel or C-SPAN or many, many others, that just aren't viable. You can't just buy the sports section of The New York Times. You take the whole paper," he said.

But McCain says the issue is about freedom for consumers.

"The government and special interests have stacked the regulatory deck in favor of preserving an outdated business model that forces consumers to buy – at ever-increasing prices — 'bundled' cable packages filled with channels they don't want to watch," McCain said.

McCain said his Senate bill "would give consumers the freedom to buy either individual channels or the entertainment industry's 'bundled' packages, letting the market decide, not the government."



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