Thursday, February 09, 2006

Whoops! The FCC admits earlier study was biased, says a la carte cable WOULD benefit consumers

Remember the computer programmer's postulate: "Garbage in, garbage out"? Today's stunning news once again proves the point.

The Federal Communications Commission now says its staff's 2004 conclusion that a la carte pricing would provide little benefit to consumers was based on a study that made "unsupported and unrealistic assumptions," and then piled mistaken calculations on top of them.

How mistaken? The 2004 study said a consumer who purchased as few as nine networks would likely face an increase in monthly bills under a la carte pricing. But the FCC now says that even if you accept that study's questionable assumptions, a customer could buy as many as 20 channels without any increase. That's three more than the average household watches.

After reevaluating several hypothetical scenarios, the new study concluded that a household's monthly bill could drop by as much as 13 percent under a la carte pricing. The 2004 study predicted that bills could rise by as much as 40 percent under a la carte.

Some credit for the FCC's reversal must go to the strange bedfellows who have been pushing for more control over what cable channels they buy. The a la carte concept was embraced early on both by conservatives, who don't want to pay for programming they don't approve of, and consumer advocates, who don't think people should have to put up with cable's monopolistic practice of charging ever-higher prices for ever-larger bundles of channels that customers may not want.

But you have to give FCC Chairman Kevin Martin credit, too - and praise the FCC's staff for its willingness to admit having been bamboozled. I don't know the back story yet, but the FCC news release outlines how the agency was misled by an erroneous Booz Allen Hamilton study submitted by the cable industry to support its argument that a la carte was a bad, bad idea.

Not true, the FCC now says. Further examination reveals that a la carte could actually help combat rising pay-TV prices and lower consumer bills.

As the FCC's new study itself puts it, dryly:

For example, under a la carte, a consumer could cut his programming bills merely by electing to purchase fewer networks. And a la carte could make service affordable to those who cannot afford bundled rates. A la carte also could offer consumers the ability to pay only for the programming that they value.

We could save money by paying only for programming we value? Now that's a novel concept.

The big question now is what lawmakers, regulators and the industry will do in response to this sudden attack of FCC common sense.

As they like to say in TV-land: Stay tuned.


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