Most cable TV subscribers would save money if they were allowed to pay for only the channels they want, a Federal Communications Commission study said Thursday, reversing the agency's earlier finding that consumers wouldn't benefit.
The analysis by FCC staff provides new support for consumer groups and conservatives pushing for a pick-and-choose pricing system to replace the bundled services offered by the cable industry. Cable companies fear that would diminish their wide distribution.
The study gives added ammunition to lawmakers and regulators who see "a la carte" as a way to clean up raunchy television by giving parents more control over the channels their children watch.
"I am pleased that the commission has concluded that 'a la carte' offering could reduce consumers' cable bills by as much as 13 percent," said Sen. John McCain, R-Ariz., who plans to introduce legislation next week to create and promote use of the system. "The report confirms what I have believed for years — if consumers are allowed to choose the channels their families view then their monthly cable bill will be less."
Senate Commerce Committee Chairman Ted Stevens, R-Alaska, said if a la carte won't cost consumers more, "I will support an effort to take such an approach, subject to discussions with providers on the downside of such a process."
The industry's main trade group, the National Cable & Telecommunications Association, was quick to point out what it sees as the downside.
Washington has no place mandating how the industry runs its business, said Kyle McSlarrow, the group's president.
"Over the last 25 years, the American free enterprise system created the most diverse video programming on earth with the best value for the customer," he said. "It is disappointing that the updated report relies on assumptions that are not in line with the reality of the marketplace."
Many industry analysts also have been skeptical that an a la carte system would fly, citing in part First Amendment concerns.
"This new regulatory regime for cable could potentially have devastating impacts for our proverbial 500-channel universe of diverse cable offerings," Adam Thierer, senior fellow at the Progress and Freedom Foundation, a think tank that studies the digital revolution and its implications for public policy, told CBS Radio News. "It very well could be the case that government regulation here could destroy that diversity and drive out some of the smaller niche channels out there, which would find a difficult time surviving on their own in a la carte world."
Congress now requires cable companies to offer a basic service package that includes local broadcast stations. The companies also offer expanded basic packages that typically include bundles of cable networks such as ESPN and CNN. For HBO, Showtime and other premium services, consumers pay an additional fee.
In Thursday's report, FCC staff said its November 2004 report was wrong to conclude that the average cable household — which watches about 17 channels — would likely face a monthly rate increase of up to 30 percent under an a la carte system.
That 2004 report reasoned that a la carte would drive up cable companies' costs for equipment, customer service and marketing — and that those costs almost certainly would be passed on to subscribers.
In fact, consumers could receive as many as 20 channels without seeing an increase in bills, the FCC staff said Thursday, blaming its earlier finding on faulty data it obtained from the cable industry.
The latest report also said in most cases subscribers would save 3 percent to 13 percent on their bills under a la carte. It noted that earlier assumptions that a la carte would lead consumers to watch two hours less of TV — and thus decrease revenue for cable TV companies and increase costs — lacked factual support.
"In sum, many consumers could be better off," the report said.
The support for a la carte comes as many conservative groups and lawmakers on both sides of the aisle have bemoaned the amount of violent and racy programming that children are exposed to on TV.
A la carte would allow cable subscribers to pick and pay for individual channels rather than being forced to buy packages. For example, parents could pick Nickelodeon and the Cartoon Network — and not have to take MTV or other channels they may find objectionable as part of a bundled package.
"I think there are some concerns here that obviously go to the heart of media regulation in America and the question of (a) how far our government can go, and (b) if it does infringe upon the First Amendment when they do it," said Thierer. "It's probably motivated by the politics of the new chairman of the FCC, Kevin Martin, who seems to be driven in this debate by his feeling that cable needs to 'be cleaned up.'"
Martin, who was named to his post by President Bush last March, has said industry leaders need to give parents more tools to help navigate the hundreds of channels on cable and satellite TV. He has previously criticized the November 2004 FCC report as flawed.
"According to today's report, a careful analysis reveals that a la carte and increased tiering could offer consumers greater choice and the opportunity to lower their bills," Martin said Thursday in a statement.
Consumer groups cheered the latest findings.
"We think this is really going to open up a whole new debate on the benefits of letting consumers pick their own channels on cable television," said Gene Kimmelman, senior director for public policy and advocacy at Consumers Union, which publishes Consumer Reports.
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