‘A la carte’ cable TV a misguided idea

Thursday, November 25, 2004 – Imagine a world where the government would decree newspapers out of existence and require, instead, that you must buy your news stories from individual reporters. Or imagine a world in which shopping malls would be banned, and where, after purchasing a pair of jeans, you’d have to slog across town to buy shoes.

Hard to contemplate such an Orwellian norm in modern day commerce, eh? Well, perhaps not. For today there has emerged a new cabal, albeit relatively isolated, which is pushing feverishly for the government to apply that type of economic model to the cable industry. And if they succeed, cable prices will soar, consumers will suffer and diversity in cable programming will all but disappear.

This group — an odd coalition of the rightist, censorship-advocating Concerned Women for America and Consumers Union — is pushing lawmakers to adopt “per-channel charge” regulations that will force consumers to pay individually for each cable network they watch.

The duo seems to view these regulations (they refer to them as “a la carte”) as a proxy in other parochial wars they want to wage against the cable industry. For the CWA, the campaign for new regulations is an extension of an effort to sift out the programming it doesn’t like — such as MTV — a campaign that has, for the most part, been laughed out of the courts. For the CU, the effort appears a proxy in its larger fight for price controls.

But what the proponents of regulations don’t realize is that if they succeed, they will do more harm than good to America’s consumers. And, if they were to succeed, the cable industry’s most exciting new talent — the scores of new Hispanic, African-American, women’s and other programs — would be the first casualties. Per-channel charge regulations would be a death knell for media diversity.

Like most industries, you see, the cable industry relies on economies of scale — the industry has invested over $75 billion in new and improved high-speed networks to create a common platform from which hundreds of cable networks now offer an unprecedented selection of choices. But the common platform is not only essential to the continued investment. The common platform — otherwise known as basic cable — is also the very lifeblood for many of the new, niche cable programs and the bulwark against price hikes for consumers.

Once a new program — take the wildly popular Latino network Si TV — makes it on the basic platform, it becomes the immediate beneficiary of a double-barreled marketing subsidy: because so many viewers will peruse the network while surfing, it gets the incalculable benefit of free promotional advertising to its potential audience of millions.

At the same time, because so many eyeballs see the new programming, the new programmer can charge advertisers a premium — added revenue which can make a life-and-death difference to networks struggling to get their sea legs.

A new cable network might have to spend over $100 million to bring new programming to the marketplace. But with the support that new programmers get from the basic cable economic model, this economic barrier is made surmountable for many new Hispanic, African-American and other programmers. Indeed, Lisa Hall, the CEO of Oxygen, a popular cable network targeted to women viewers, recently said of the shared platform that, “if there’s a better model, I’d like to see it.”

And in this view, Hall is hardly alone. The General Accounting Office — Congress’ chief auditing agency — said that if per-channel charges were adopted, then diversity in cable programming would likely disappear, and prices would likely rise for many of my constituents — and all consumers, for that matter — who design to view more than just six cable networks. Industry studies by respected analysts Bear Stearns and Booz Allen echoed the same findings. And just this month, the Federal Communications Commission reported that prices under a la carte would increase by as much as 30 percent while “reduc(ing) the overall universe of channels.”

CWA and CU have held out their per-channel charge proposal as having benefits for consumers by allowing them to purchase no more programming than they choose. But an enormous bipartisan group of organizations opposing media concentration — from leading civil-rights organizations like the National Urban League and LULAC to leading conservative voices like Citizens for a Sound Economy and Pat Robertson — have dismissed the arguments as sophistry, and pointed out that consumers will be the big losers if these media-concentrating rules are ever enacted.

Like the media concentration debate last year, these many voices opposing the per-channel charge regulations are right.

Loretta Sanchez, D-Garden Grove, is a member of the U.S. House of Representatives.