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GAO: A La Carte Not a Panacea

A long-awaited General Accounting Office report on the cable industry concluded that retail cable rates have risen due to a number of factors and that the sale of programming on an a la carte basis would not be a uniformly positive development.

The most damaging news in the 94-page study, released Friday, was the finding that cable rates are 15% lower in markets where two wireline cable companies compete. However, other government reports and consumer advocates have documented that trend before.

The GAO said cable rates have gone up in other markets due to rising programming costs and capital investments to provide consumers with digital services, including high-speed data.

On the key a la carte issue, the GAO said requiring cable operators to break up programming tiers would have mixed results, causing some cable networks to lose ad revenue and some subscribers to see their bills rise.

"An a la carte approach would facilitate more subscriber choice but require additional technology and customer service. Additionally, cable networks could lose advertising revenue. As a result, some subscribers' bills might decline but others might increase," the GAO said.

The GAO took about one year to prepare the report, which was based on interviews with most of the top cable companies and other industry participants.

The report's mixed outlook on the a la carte issue could help cable to combat a la carte mandates brewing on Capitol Hill. Sen. John McCain (R-Ariz.), an a la carte supporter, had ordered the GAO to investigate the feasibility of breaking up cable-programming tiers to expand consumer choice and lower bills.

"[The] GAO's analysis confirms that cable-price increases reflect significant investments by cable operators in infrastructure and programming, which have improved the quality and consumer value of cable television," National Cable & Telecommunications Association president and CEO Robert Sachs said in a prepared statement.

"The report also shows -- significantly, we believe -- that proposals to reregulate cable-program services would not benefit consumers," he added. "Rather, forcing cable operators to package programming a la carte would produce a net loss for many cable customers, who would end up paying higher prices for fewer channels.