A La Carte Mandates & Price Controls

by on January 31, 2008 · 14 comments

FCC Chairman Kevin Martin’s desire to impose a la carte mandates on cable operators is well-known. But his advocacy has always lacked specifics regarding how such regulation of the multi-channel video world would work in practice.

Ted Hearn of Multichannel News points to this fact in his article today, “FCC Chairman Vague On Capping A La Carte Prices: Martin Has Yet To Spell Out How Mandate Would Work.” Ted notes that, “At least in theory, programmers could set a la carte prices so high that the only rational option would be the purchase of the bundle.” Thus, Ted wants to know “how so-called wholesale a la carte mandates would be effective if the FCC won’t police the per-channel rates being sought”?

Excellent question, Ted, and one that all analysts who follow this issue want the Chairman to answer. After all, almost all the serious economists and Wall Street analysts who have studied this issue have reached a consistent conclusion: Unless you only subscribe to a few channels, your bill will likely go UP, not down, under a la carte regulation. [Here's a concise explanation of why that will be the case.] So, what’s the FCC going to do if those prices start going up once their plan backfires?


Hearn notes that, at least so far, Chairman Martin has not answered that question. “Martin did not indicate how wholesale a la carte mandates could be effective if the agency would let programmers use pricing strategies to defend the bundle,” Hearn reports.

And that’s probably for good reason since the only logical regulatory response would be good ‘ol fashion price controls. But…

Martin danced around the issue of a la carte price controls on Thursday, telling reporters that he is relying on assertions by members of the American Cable Association that unbundling mandates on the Walt Dinsey Co., Viacom, News Corp. and NBC Universal would take pressure off retail cable rates. ACA represents hundreds of small cable companies.

“I thought [wholesale a la carte] was an idea that some members of the cable industry — small cable operators — had of having to address high cable rates,” Martin said. “I think that’s an idea for the commission to consider and I think it could end up helping addressing it – at least small cable operators have all said it would help them try to address it and lower cable rates.”

Martin is being evasive, of course, because moving beyond the theory and into the messy potential unintended consequences of a la carte regulation is just no fun! But make no doubt about it, there is no avoiding the ugly truth that a la carte regulation will likely have a negative impact on either the quantity, quality, or price of video services. When government seeks to control one of those variables, the others react. It’s the old game of regulatory Whack-o-Mole in action.

  • eric

    Won’t the increasing availability of on-demand internet video act as a brake on overpricing of a la carte or any other package? For example, I’m about to try out Netflix’s on-demand movie service, and it sounds like a great alternative to cable or satellite for me. Currently I have the opportunity for unlimited access to their streaming movie catalog as a perk that comes even with their cheap $9/mo. plan for 1-physical-DVD-out-at-a-time. In some ways, that’s better than a $40/month cable subscription.

  • eric

    Won’t the increasing availability of on-demand internet video act as a brake on overpricing of a la carte or any other package? For example, I’m about to try out Netflix’s on-demand movie service, and it sounds like a great alternative to cable or satellite for me. Currently I have the opportunity for unlimited access to their streaming movie catalog as a perk that comes even with their cheap $9/mo. plan for 1-physical-DVD-out-at-a-time. In some ways, that’s better than a $40/month cable subscription.

  • Dave Ignatius

    It’s funny that Adam Theirer always fails to mention that his employer (Progress and Freedom Foundation) receives a majority of its funding from the cable industry. Adam — when are you going to be intellectually honest and disclose that relevant fact?

    Looks like it is the old game in Washington for the industry to pay a shill to be its mouth piece.
    Cable industry “Whack-a-mole” in action. Whether you agree with FCC Chairman Kevin Martin or not, at least he is has been up front and consistent on where he stands. Adam have you ever written about rising cable rates that have gone up more than 100% in the last ten years? Instead, at every turn, you shill for the cable industry.

    When you come back and disclose your industry benefactors then we can weigh your intellectual honesty and whether you are unbaised.

  • Dave Ignatius

    It’s funny that Adam Theirer always fails to mention that his employer (Progress and Freedom Foundation) receives a majority of its funding from the cable industry. Adam — when are you going to be intellectually honest and disclose that relevant fact?

    Looks like it is the old game in Washington for the industry to pay a shill to be its mouth piece.
    Cable industry “Whack-a-mole” in action. Whether you agree with FCC Chairman Kevin Martin or not, at least he is has been up front and consistent on where he stands. Adam have you ever written about rising cable rates that have gone up more than 100% in the last ten years? Instead, at every turn, you shill for the cable industry.

    When you come back and disclose your industry benefactors then we can weigh your intellectual honesty and whether you are unbaised.

  • Adam Thierer

    Dave… PFF is perfectly transparent about where we get our support. It’s all right there on our website under the “About” tab:

    http://www.pff.org/about/supporters.html

    Incidentally, do you complain about the fact that there is no similar disclosure from Leftist think tanks? Free Press, for example, refuses to identify it sources of support. It consistently amazes me how the Left gets away with hiding its sources of funding but then bitches about others who disclose.

    And for your information–but not that you care–we do not get the majority of our funding from cable companies. PFF receives contributions from a wide diversity of high-technology, communications, media and cable companies.

    If you ever care to engage in actual debate about the substance of issues instead of engaging in cowardly ad hominem attacks, feel free to come back and join us for a serious debate.

  • Adam Thierer

    Dave… PFF is perfectly transparent about where we get our support. It’s all right there on our website under the “About” tab:

    http://www.pff.org/about/supporters.html

    Incidentally, do you complain about the fact that there is no similar disclosure from Leftist think tanks? Free Press, for example, refuses to identify it sources of support. It consistently amazes me how the Left gets away with hiding its sources of funding but then bitches about others who disclose.

    And for your information–but not that you care–we do not get the majority of our funding from cable companies. PFF receives contributions from a wide diversity of high-technology, communications, media and cable companies.

    If you ever care to engage in actual debate about the substance of issues instead of engaging in cowardly ad hominem attacks, feel free to come back and join us for a serious debate.

  • Anonymous

    Right on Adam! I agree completely with your response to dear old Dave.

    Transparency works both ways. Even if Adam were a cable shill (which is pretty obvious that he is not!) why would he take a position against A La Carte if it would serve to raise prices that Cable Companies could charge? I mean more profits and less strain on their infrastructure so they don’t have to spend money on upgrades? Why would the Cable Co.s not want to do this?!

    Seems to me that Adam is looking at the big picture realistically and coming to some pretty solid conclusions based on solid research and facts as to why it’s a bad idea for the FCC to mandate A La Carte.

    When you take into account the obvious favoritism that Martin holds for the Telecoms and the obvious dislike that Martin holds for the Cable Co.s, well the picture becomes even clearer. He’s not really mandating A La Carte primarily because it might, in theory, be good for consumers.

  • Anonymous

    Right on Adam! I agree completely with your response to dear old Dave.

    Transparency works both ways. Even if Adam were a cable shill (which is pretty obvious that he is not!) why would he take a position against A La Carte if it would serve to raise prices that Cable Companies could charge? I mean more profits and less strain on their infrastructure so they don’t have to spend money on upgrades? Why would the Cable Co.s not want to do this?!

    Seems to me that Adam is looking at the big picture realistically and coming to some pretty solid conclusions based on solid research and facts as to why it’s a bad idea for the FCC to mandate A La Carte.

    When you take into account the obvious favoritism that Martin holds for the Telecoms and the obvious dislike that Martin holds for the Cable Co.s, well the picture becomes even clearer. He’s not really mandating A La Carte primarily because it might, in theory, be good for consumers.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    The A La Carte debate, from my point of view, is quite humorous since it points to how “fluid” ones intellectual viewpoint can be.

    I tend to be pro-regulatory, I don’t have a problem with governments subsidizing cable/telecoms services to rural areas where these companies would find it uneconomic. I take this position for the “common good”. Adam takes the position that this form of government “interference” is inappropriate since it subsidizes something that is uneconomic. A true capitalist viewpoint.

    Now here, we have a situation were a “regulation” would unbundle pre-defined packages so that we have more competition and end the subsidy for uneconomic components. Adam’s position, in this case, is to keep bundled cable packages thus supporting subsidizing uneconomic components in the name of the “common good”. My position, in this case, if its uneconomic cable service, let it die. A true capitalist viewpoint.

    I guess my hand should go out to Adam for recognizing the concept of the “common good”. Even worse, maybe Ayn Rand is beginning to affect my empathy for the “common good”.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    The A La Carte debate, from my point of view, is quite humorous since it points to how “fluid” ones intellectual viewpoint can be.

    I tend to be pro-regulatory, I don’t have a problem with governments subsidizing cable/telecoms services to rural areas where these companies would find it uneconomic. I take this position for the “common good”. Adam takes the position that this form of government “interference” is inappropriate since it subsidizes something that is uneconomic. A true capitalist viewpoint.

    Now here, we have a situation were a “regulation” would unbundle pre-defined packages so that we have more competition and end the subsidy for uneconomic components. Adam’s position, in this case, is to keep bundled cable packages thus supporting subsidizing uneconomic components in the name of the “common good”. My position, in this case, if its uneconomic cable service, let it die. A true capitalist viewpoint.

    I guess my hand should go out to Adam for recognizing the concept of the “common good”. Even worse, maybe Ayn Rand is beginning to affect my empathy for the “common good”.

  • Adam Thierer

    Steve… the “common good” at the force of a gun is not so good. That’s the difference between us, and it’s why I refer to myself as a “radical pacifist.” I believe in using voluntary agreements to achieve “the common good.” You believe in using coercion.

    Finally, if we took your position to the logical extreme that all bundles or packages were somehow fundamentally at odds with “the common good”–however you and your statist chums define it–then we would need to empower regulators to essentially dismantle our economy and restructure entire markets since bundles and packages are all around us. Just go to your corner grocery store or local car dealership sometime and try to buy everything in the most atomistic unit possible. It’s not possible. And it’s not possible because it’s not efficient. Same goes for cable TV.

    And no one is making you buy cable each month either.

  • Adam Thierer

    Steve… the “common good” at the force of a gun is not so good. That’s the difference between us, and it’s why I refer to myself as a “radical pacifist.” I believe in using voluntary agreements to achieve “the common good.” You believe in using coercion.

    Finally, if we took your position to the logical extreme that all bundles or packages were somehow fundamentally at odds with “the common good”–however you and your statist chums define it–then we would need to empower regulators to essentially dismantle our economy and restructure entire markets since bundles and packages are all around us. Just go to your corner grocery store or local car dealership sometime and try to buy everything in the most atomistic unit possible. It’s not possible. And it’s not possible because it’s not efficient. Same goes for cable TV.

    And no one is making you buy cable each month either.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    A little short on humor? I have not accused you of being a “shill”, but your response says that I and my “statist chums” are into coercion. I don’t know who you are referring to and I am not proposing any coercion.

    I simply find it ironic that if a corporation wants to bundle a service and restrict the consumer’s “freedom of choice” that this is considered “GOOD”. Now if the government does the same thing that is automatically defined as “BAD”.

    You take the position that if we don’t appreciate a corporation, you don’t have to do business with that corporation. True enough, but we still have monopolies and where I live, I can only get cable from one company. So while no one is making me buy cable each month, I have no choice if I want to be “plugged in”.

    If we extend this corporate “no one is making you” buy concept, the same case could be made for living here, in the US. No one is making you live here. If you do not like the laws and regulations passed by the government then move to another country. My point, oppression whether it comes from a COMPANY or a GOVERNMENT is wrong.

  • http://www2.blogger.com/profile/14380731108416527657 Steve R.

    A little short on humor? I have not accused you of being a “shill”, but your response says that I and my “statist chums” are into coercion. I don’t know who you are referring to and I am not proposing any coercion.

    I simply find it ironic that if a corporation wants to bundle a service and restrict the consumer’s “freedom of choice” that this is considered “GOOD”. Now if the government does the same thing that is automatically defined as “BAD”.

    You take the position that if we don’t appreciate a corporation, you don’t have to do business with that corporation. True enough, but we still have monopolies and where I live, I can only get cable from one company. So while no one is making me buy cable each month, I have no choice if I want to be “plugged in”.

    If we extend this corporate “no one is making you” buy concept, the same case could be made for living here, in the US. No one is making you live here. If you do not like the laws and regulations passed by the government then move to another country. My point, oppression whether it comes from a COMPANY or a GOVERNMENT is wrong.

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