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Cable Choice is the Right Choice

By Tim Winter

 

When MTV produced the Super Bowl halftime show with Janet Jackson, parents around the country were shocked and outraged at what they saw. But children were not, simply because they watch MTV and know this is standard fare on that network. Given the chance, how many parents would have picked up the phone and unsubscribed to MTV the next day? But they can't. The industry won't allow it. And MTV receives hundreds of millions of dollars every year from families who don't want that network in their home.

 

With the exception of cable television, no other media sector requires a customer to purchase a product he/she does not want or that he/she may even find harmful or offensive in order to consume a product that he/she does want. When you go to the ten-theater cineplex to watch a movie, are you forced also to pay for the other nine movies you're not there to watch? Of course not. If you subscribe to Sports Illustrated magazine, are you also forced to purchase Time magazine and People magazine? Such an idea would be absurd. If you go to the newsstand to buy the day's Washington Post, are you forced also to purchase the Washington Times? No, and if you were, you'd go to a different newsstand.

 

So why is it that we cannot pick and choose and pay for only the cable networks we want in our homes? Because the cable network programmers have a chokehold on the public. They make billions of dollars every year by forcing you to pay them for channels you don't watch, don't want, and may actually find offensive. And unlike the newsstand analogy, the programmers force their bundle onto every distributor, whether it be a cable system or a satellite operator. There is no alternative.

 

That's why family groups like the Parents Television Council have joined with national consumer organizations and even a number of prominent cable television executives in calling for some form of la carte cable pricing.

 

Large media conglomerates bundle their most popular networks with other less-popular networks, and they force you the customer to receive and pay for all of them. Do you want to watch business news on CNBC? Then you must also pay NBC for Bravo, SciFi, USA and another dozen or so cable networks it owns. Do you want to watch football on ESPN? Then you will also have to pay Walt Disney for the other networks it owns, like ABC Family and Lifetime. Or maybe you want Nickelodeon for your kids. If so, you will also have to pay Viacom for its anti-family programming like MTV, VH-1 and gay-lifestyle network Logo. For that matter, why should a Logo subscriber be forced to pay for an unwanted children's network like Nick? They shouldn't.

 

What is perhaps worst of all is that many in the cable industry have succeeded in perpetuating their anti-competitive and extortion-like business practices with a litany of lies. And every time one of their lies is exposed, they create a new one. Between their intentional misrepresentation of the truth and their bottomless wallets flush with campaign contributions for Senate and House incumbents Democrat and Republican alike they have all but silenced any public debate on the matter through fear and intimidation.

 

Some in Congress feel that so-called "Family Tiers" of cable programming might be a workable compromise to the issue. But in early 2005, when several influential lawmakers suggested family tiers as an option, the industry claimed that it could not possibly offer such a package. When threatened with legislation last December, remarkably the industry was able to implement family tiers in a matter of days. Another day, another lie exposed. But the truth about family tiers is that they are a dodge; a red herring, unless unless each family can choose its own family tier. Shouldn't a family with a 6-year old have different needs than a family with a 16-year old? Not according to the industry. With no sports, no live entertainment, no movie channels and no choice for news, their family tier structure is intended to fail so they can claim there is no demand.

 

The reasons in favor of la carte cable pricing or "Cable Choice" are many, and the proponents represent a broad and diverse coalition of local and national organizations including many in the cable/satellite industry. The opponents of Cable Choice, however, appear to share one common trait: They have an enormous financial benefit by keeping the status quo. The opposing arguments can be quickly addressed and easily dismissed:

 

Consumer Prices

The cable industry has spent much of the past year convincing Congress, the media and the public that Cable Choice would increase, not decrease the cost of cable. But for more than a decade, the cost of a cable subscription has grown at several times the rate of inflation. So why is it that, suddenly, the industry cries out on behalf of consumer prices as a reason for keeping the current structure? Price increases have never been a concern when the cable networks were keeping the money and nobody questioned them about it. The reality is that consumer prices would not go up under Cable Choice. They would go down. Forced to compete for the consumer's dollar, networks would be forced to deliver a better product at a lower price. History seems a perfect guide: When in the course of a free commercial market has competition resulted in higher, not lower, consumer prices? Answer: Never. And if pricing truly was a concern, why are the largest consumer organizations in the country ardently advocating Cable Choice? Both the Consumers Union, publisher of Consumer Reports magazine, and the Consumer Federation of America emphatically support Cable Choice as a means of helping the public by lowering cable bills.

 

If la carte pricing would be certain death, as the industry claims, then why are all the networks now jumping to offer pay-per-view programming via internet video streams? And this practice goes a step beyond an la carte network model; these are individual programs which are being offered on an la carte basis. With Cable Choice, the market will decide which networks, and which shows, will survive.

 

Program Diversity

I bet you can name a cable network targeting African-Americans. Let me guess: BET, right? Sure, but can you name a second, or a third or a fourth such network? They exist, but under the current structure most African-American families won't ever see them. The industry claims program diversity would be lost with cable choice. But that is untrue. The reality today is that unless a network is owned by one of the major media conglomerates, they are unlikely to get carriage at all. Programmers use retransmission consent to force all of their networks onto a cable system, leaving little space for small and niche-targeted networks. For example, in Los Angeles there are about 60 channels that comprise the basic and expanded basic cable tiers. Of those 60 channels, 13 are entirely or partly owned by NBC/GE; nine by CBS/Viacom; seven by Fox/News Corp.; 11 by Disney; and Time-Warner and Liberty combined own another 16 channels. Unbundling will allow more niche networks to reach the market. And those with quality programming at a fair price will succeed. Case in point one of the most successful cable networks in history and certainly the cable network held in the highest regard in terms of program quality is HBO, a network which is sold on its own outside of the basic or expanded basic tiers.

 

Government Interference

What both sides of this issue can agree on is that government regulation is the option of absolute last resort. But sadly we are at that point. Given the deceit and the utter disregard that the cable industry has shown for the public on this issue, there appears to be no private sector solution. Some opponents of Cable Choice claim that the government has no legal authority to impose an la carte unbundling of cable network programming. But clad with the Commerce Clause of the US Constitution, Congress has intervened in anti-competitive markets for more than a hundred years. Furthermore we have never suggested that the industry be prohibited form selling programming in bundled tiers. Rather our position is that cable operators should allow consumers to unbundle networks if they so choose. Some consumers may choose to keep their programming bundles. But to prohibit the unbundling would perpetuate price gouging and ultimately prevent market forces from entering into the business equation.

 

If there were no need for government involvement at this point, then why are cable industry executives speaking to Congress about a problem that they, themselves, are unable to control? DISH Network CEO, Charlie Ergen, told Congress he wants to provide Cable Choice but cannot because the networks forbid him from doing so. Matt Polka of the American Cable Association represents 1100 cable systems across the US. He told Congress that he wants to provide Cable Choice but cannot because of the network chokehold. And now Charles Dolan, Chairman of Cablevision, says he wants to offer Cable Choice. These business leaders know there is a demand for unbundled programming and they are unable to offer it under the current industry structure. Sadly, the industry has been exposed and it appears a regulatory solution is needed.

 

Solutions

There are two practical Cable Choice solutions. One is an "opt-in" solution. Think of it like a sushi restaurant menu. You pick and pay for only those items you want. It is simple and straightforward. But there is also a second solution which, I believe, would assuage many of the cable industry's concerns; yet it would also provide adequate protections for parents and families, while also offering the economic benefits desired by the consumer organizations. This second solution is an "opt-out" solution. You would purchase a programming tier and could "opt out" of some number of networks which you didn't want, receiving a credit on your monthly cable bill for those networks you "opt out" of. This structure might encourage many subscribers to include more networks than they otherwise might under and "opt-in" solution, and it would preserve some semblance of the current economic structure that the industry yearns to retain. Either way, the industry has shown no interest or movement towards embracing a more free-market approach to cable programming bundles. That's why such a diverse group of organizations and a growing number of Americans across the country are mobilizing to make Cable Choice a reality.

 

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Tim Winter is the President of the Parents Television Council (www.parentstv.org), a non-profit, non-partisan organization committed to protecting children and families from graphic sex, violence and profanity in the media.

 

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