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    A la carte cable TV suggested

    BY Sam Diaz
    03/29/2004

    This story also appeared in the Kansas City Star.

    It's easy for Congress to take the cable television industry out to the woodshed for raising rates and force-feeding channels customers don't necessarily want.

    But to suggest rates would fall if consumers were allowed to hand-pick individual channels and pay for them individually is misleading, experts say.

    Cable TV is on the verge of a major transformation -- and in some ways, cable companies are stuck between two major forces: technology that's revolutionizing television in the 21st century and niche programming that targets specific viewers.

    This year alone, technology is forcing the industry to make major investments to its infrastructure.

    High-definition programming is growing in both availability and popularity. Digital video recorders are being built into cable set-top boxes scheduled for arrival before the end of the year. And video-on-demand services, which will allow users to select programs for instant viewing, should be hitting cable systems as early as summer.

    Since the beginning of 2003, Bay Area Comcast customers have seen rates jump twice, by an average of 6.5 percent then an additional 7 percent.

    Late last week, members of the U.S. Senate Commerce Committee said they would look into new regulations to address soaring prices and allow consumers to pick a lineup channel by channel.

    If Congress is successful in pressuring the cable industry into offering a la carte channels, the likely result would be bigger bills, fewer services and a smaller -- and less diverse -- list of channels.

    ``Customers aren't asking for these products and services,'' said Andrew Johnson, spokesman for Comcast, the cable TV provider in most Bay Area cities. ``They're demanding them.''

    If cable wants to stay competitive with the growing popularity of satellite TV providers DirecTV and Dish Network, it has to keep up with the offerings and technology.

    That competition is actually keeping monthly rates from skyrocketing, said Wayne Brough, chief economist with Citizens for a Sound Economy, a Washington, D.C., organization that advocates free markets and limited government.

    ``From our perspective, the market gives consumers what they want better than a regulated cable industry could,'' Brough said. ``If you have a McDonald's on one street corner and a Burger King on the other corner, that's better than having the government step in to regulate'' the price of a hamburger.

    Some of the rate increases are the result of expanded services, especially ones that customers haven't even seen yet, said Phillip Swann, president of tvpredictions.com, a research firm in Washington, D.C.

    ``They're not just increasing prices for the sake of increasing prices,'' Swann said. ``They don't have that luxury anymore with satellite TV out there.''

    Cable companies don't own the programming they broadcast. They buy it from big media conglomerates such as Viacom, which owns CBS and MTV, or Walt Disney, which owns ABC and ESPN.

    And those big companies are demanding more money to offset the costs of upgrading to HDTV and adding niche channels such as Spike TV or Toon Disney.

    ``It's the niche channels that would get hurt because they would never get broadcast,'' Brough said. ``On their own, they wouldn't have enough people signing up for them.''

    Even the most popular -- and highest-priced -- networks such as ESPN would end up costing more at the consumer level. If only 75 percent of the total viewers bought ESPN a la carte, it wouldn't reduce the price that Disney charges Comcast or DirecTV for the rights to broadcast it.

    Last month, Viacom and EchoStar, parent company of Dish Network, butted heads when Viacom asked for more money and demanded inclusion of new channels into the Dish Network lineup. When the two sides couldn't reach a deal, MTV, Nickelodeon and even KPIX (Channel 5) -- a CBS-owned station -- went dark for 24 hours over the Dish Network system.

    It's no wonder Comcast is trying to buy troubled Disney.

    But caving in to the idea of a la carte programming is ``a horrible idea,'' Swann said.

    ``It would totally disrupt the competitive balance between cable and satellite, which is the best thing that viewers have going for them right now,'' he said. ``If they do that, the satellite guys will be clinking their champagne glasses for years. It would destroy cable.''

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    Contact Sam Diaz at sdiaz@mercurynews.com or (408) 920-5021.

    by Sam Diaz on 3/29/04.