but consulting company questions Commission's latest findings

Revising its previous conclusion on the controversy, the Federal Communications Commission now says that letting consumers pick their own cable networks could save them money.

In May of 2004 the FCC commissioned a report on a la carte cable distribution based on research compiled by the Booz Allen Hamilton company. The Commission's new findings argue that the Booz Allen study included mathematical miscalculations and flawed assumptions.

"Based on a more complete analysis of the costs and benefits of bundling and the potential costs and benefits of a la carte," the new report concludes, " . . . a la carte could be in consumers’ best interests."

The FCC's "Further Report," issued Friday, February 9th, argues that the First Report focused more on the economic benefits of "bundling" video services—requiring consumers to purchase a big package of channels—and less on the benefits of "themed tiers" and letting consumers choose their own array of channels.

The Further Report disagrees with the previous reports' conclusion that consumers would watch less under an a la carte system, therefore decreasing cable company revenue and advertising profits, forcing cable companies to spend more on marketing and charge more for services. "[I]f a consumer regularly watches only 10 channels and under a la carte continues to subscribe to those 10 channels," the latest report argues, "one would not expect the time the consumer spends viewing video programming to change dramatically."

The new study also contends that niche networks might benefit under a la carte, since the "dedicated audience of such a network may be willing to pay sufficient fees to more than cover the network’s costs, in a manner similar to how premium networks and pay-per-view programs support themselves."

The FCC report offers a series of alternative models to the present system, including "mixed bundling," in which consumers could either buy bundled packages or choose networks individually; "themed tiers," in which consumers would buy a set of channels that adhere to a particular theme, such as "Family and Information," "Movies," or "Sports;" and "subscriber selected tiers," in which the consumer could create their own tier package.

But Booz Allen officials insist that while they may have made some mistakes in their math, their basic findings remain sound: a la carte programming would jack up the price for consumers and diversity would suffer.

Cable networks "that offer innovative and untested formats, will be forced out of business before they have a chance to build the audience they need to become profitable," the company says on their Web site in response to the FCC's conclusions. "Others will have to make dramatic budget cuts, harming the quality of their programs."

Bookmark/Search this post with: