Martin: New FCC Study Favors a la Carte

Federal Communications Commission chairman Kevin Martin said Tuesday that a pending agency study concluded that cable "could" sell programming a la carte in an economically feasible manner, reversing key findings in an FCC study for Congress last November.

Appearing before the Senate Commerce Committee, Martin said last year's FCC report relied on "problematic assumptions and presented incorrect and, at times, biased analysis."

Last year's FCC study concluded that a la carte would require cable customers to pay more to maintain the same level of service. But Martin indicated that the new report he commissioned would not embrace that finding.

"Based on a more complete analysis of the costs and benefits of bundling and the potential costs and benefits of a la carte pricing, our new report concludes that purchasing cable programming in a more a la carte manner in fact could be economically feasible and in the consumers' best interests," Martin said.

He noted that the first report was blessed by former FCC chairman Michael Powell and former Media Bureau chief Ken Ferree.

Martin did not comment on the first report after its release. In private, he did complain about it, according to a cable lobbyist.

Cable sells the vast majority of its networks in packages -- a bundling approach considered the most efficient means of program distribution in terms of per-channel costs. But cable critics want to break up tiers so consumers don't have to pay for channels they don't watch.

The FCC's first study concluded that it would be cheaper for consumers to block channels they don't want than to buy just their favorites a la carte.

With his comments, Martin blindsided D.C. cable lobbyists. His decision to renounce a major FCC study -- which tracked findings in an October 2003 study by the U.S. Government Accountability Office -- was the most profound cable-related flip-flop at the FCC since 1993 and 1994, a period when the agency cut cable rates 10%, then by another 7%, and then eased up by allowing rates to rise $1.50 annually if related to channel additions.

After Martin spoke, National Cable & Telecommunications Association president Kyle McSlarrow told the Senate panel that government-forced a la carte was "a very dangerous idea," akin to requiring a newspaper to sell the sports and business sections separately, and constitutionally suspect.

He added that a la carte would certainly damage one of cable's most attractive features -- programming diversity -- because niche channels like TV One, which is aimed at African Americans, need to keep company with ESPN and Discovery Channel on widely distributed tiers in order to have a chance of surviving in the market.

In terms of legislation, Senate Commerce Committee chairman Ted Stevens (R-Alaska) said he wasn't seeing progress. He added that a bill to hike broadcast indecency fines from $32,500 to $500,000 per offense was stalled in the Senate between those who think the $500,000 level is too low and those who think it is too high.