U.S. Senator Takes On Cable Bundles

WASHINGTON, D.C.: Senator John McCain has introduced a bill in the U.S. Congress to encourage a la carte packages from pay-TV platforms, allowing customers to select individual channels they want to subscribe to without having to sign up for bundled packages.

"This legislation has three principal objectives: encourage the wholesale and retail ‘unbundling’ of programming by distributors and programmers; establish consequences if broadcasters choose to ‘downgrade’ their over-the-air service; and eliminate the sports blackout rule for events held in publicly-financed stadiums," McCain said in introducing the legislation yesterday.

He continued: "The video industry, principally cable companies and satellite companies and the programmers that sell channels, like NBC and Disney-ABC, continue to give consumers two options when buying TV programming: First, to purchase a package of channels whether you watch them all or not; or, second, not purchase any cable programming at all. This is unfair and wrong—especially when you consider how the regulatory deck is stacked in favor of industry and against the American consumer. This is clear when one looks at how cable prices have gone up over the last 15 years, which is brought to light by the most recent Federal Communications Commission pricing survey."

McCain quoted figures from the FCC indicating that the average monthly price of basic cable rose 5.4 percent in 2010 to $54.45. "Those who provide video directly to consumers, like cable and satellite companies, are not solely to blame for the high prices consumers face today," McCain said. "Many articles have been written about the packages of channels, commonly called ‘bundles,’ sold to cable and satellite companies by video programmers like Comcast-NBC, Time Warner, Viacom and The Walt Disney Company, which owns 80 percent of ESPN."

The high affiliate fees charged by a channel like ESPN—McCain quoted an SNL Kagan report putting it at $4.69 per home per month—is driving up cable TV costs for everyone, the Senator noted. "Whether you watch ESPN or not, and admittedly I do all the time, all cable subscribers are forced to absorb this cost. For instance, because these channels are bundled into packages, all cable consumers, whether they watch sports or not, are paying for them anyway. Cable and satellite carriers that consider dropping ESPN must also contemplate losing other channels in the bundle, like the Disney Channel."

McCain also addressed threats by some of the broadcast networks—in response to Aereo—to pull their over-the-air signals and go entirely behind a pay wall. "Our country is facing a spectrum crunch, and if broadcasters who are using the public airwaves in return for meeting certain public interest obligations are going to deviate from those obligations, it is my view that we should consider if that is the most efficient use of our country’s spectrum," McCain said. "It would be a distortion of this basic social compact if over-the-air viewers were treated as second-class citizens. This bill provides a legislative response if broadcasters either downgrade their signal or pull it altogether. The bill provides that a broadcaster will lose its spectrum allocation, and that spectrum will be auction by the FCC, if the broadcaster does not provide the same content over the air as it provides through [a pay TV provider]."

The Senator concluded: "In the end, the Television Consumer Freedom Act is about giving the consumer more choices when watching television. It’s time for us to help shift the landscape to benefit television consumers. Now I know the broadcasters and cable companies are likely to suggest that the government should not micromanage how they offer their product to customers and that bundling can promote diverse offerings. What those interests will fail to mention, is that the government has already entered the marketplace, and conferred certain rights and privileges like the compulsory license, network nonduplication, syndicated exclusivity and retransmission consent, which stack the deck in the favor of everyone but the American consumer."

The NCTA meanwhile, which represents the interests of the cable TV industry, called McCain’s a la carte proposal a "lose-lose proposition. As countless studies have demonstrated, subscription bundles offer a wider array of viewing options, increased programming diversity and better value than per channel options. In today’s video marketplace, consumers enjoy more choice than ever before. They can choose their video entertainment from a variety of cable, satellite, telco and online providers; they can consume video on their TVs, their iPads, and their mobile phones; and they can purchase video via traditional subscription bundles, online bundles and individual shows. In the face of such innovation and expansion, attempting to force retail models on private providers is unnecessary and counterproductive."