False "Choices"

Progress Snapshot
Release 2.1 January 2006

  by Adam Thierer and Ray Gifford *

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Do we need federal regulations giving us "the right" to purchase cars without radios, shoes without shoestrings, and newspapers without the sports page? It sounds silly, but that's what some advocate for the couch-potato fare we get on cable and satellite television.

Under the guide of "consumer choice," some activists-whose real agenda is control of the content on television-are proposing "a la carte" mandates for cable and satellite. In theory, a la carte rules will give us the freedom to pick and choose our channels. And, again in theory, this would also enable us to lower our monthly cable bills.

If only it were so simple. There is no such thing as a free lunch or a costless regulation. Indeed, the costs associated with a la carte regulation will be steep in terms of true consumer choice and program diversity. And monthly bills aren't likely to go down either.

How it is that we have gained access to a proverbial 500-channel universe of diverse viewing options on cable and satellite? All of these options didn't just magically appear; companies and investors took risks developing unique channels to suit diverse interests. Thirty years ago, few could have imagined a world of 24-hour channels devoted to cooking, home renovation, travel, weather, Catholicism, women's issues, and golf. Yet, today we have The Food Channel, Home & Garden TV, The Travel Channel, The Weather Channel, EWTN, Oxygen, The Golf Channel, and countless other niche channels devoted to almost every conceivable human interest. How did this happen?

The answer is "bundling." Many niche-oriented cable networks only survive because they are bundled with stronger networks. On their own, the smaller channels can't survive; nor would anyone have risked launching them in the first place. "Bundling" is a means for firms to cover the enormous fixed costs of a cable or satellite system; a means to satisfy the most consumers with the broadest array of offerings; to keep the niche, specialty programs viable alongside popular networks such as CNN, ESPN and TBS.

Bundles, therefore, are not anti-consumer but pro-consumer. Bundling reflects the underlying economics of building and maintaining a network and putting quality programming on it.

This is why a la carte regulation is so dangerous. It threatens the wonderful diversity of programming we have at our disposal today. As a la carte regulation advocate Brent Bozell of the Parents Television Council admits, there is virtually no doubt that some cable channels will disappear under an a la carte regime. Bozell recently told The Los Angeles Times that under a la carte, "Maybe you won't have 100 channels, maybe you'll only have 20. But good programming is going to survive, and you will get rid of some waste."

Ah, the conceit of a regulator and central planner. Mr. Bozell is fine with consumer choices shrinking so long as what's left on the air is the "good programming" that he desires! In the name of "choice," a la carte advocates will give us fewer choices. But the choices will be "good" ones.

It just goes to show that the fight over a la carte is really a moral battle about what we can see on cable and satellite TV. But Mr. Bozell and many other a la carte crusaders are likely going to be sorely disappointed when the channels that they dislike (such as MTV, F/X, and Comedy Central) survive because they will likely remain very popular, while the channels they think contain "good programming" witness massive price hikes and potentially go under. Some of the most vulnerable programmers to a la carte regulation will be religious and ethnic-focused channels. Without bundling, there probably won't be the audience to support these channels.

Indeed, most family-oriented and religious programmers oppose a la carte mandates for this reason. They understand that their programs only attract a small subset of the overall universe of eyeballs. If their networks are not bundled alongside other channels, or included in the basic tier, they might disappear entirely.

Our economy thrives on parties being free to contract with one another on terms they find mutually attractive. Thus, cable and satellite programmers offer consumers bundles of channels, and consumers overwhelmingly accept those terms (over 85% of Americans pay for their TV). Before government regulates away that freedom to contract, consumers should take pause and realize that a la carte will be an illusory victory for "choice."

- This article appeared in the Wall Street Journal Editorial Page on January 14, 2006.

* Adam Thierer is a Senior Fellow and Ray mond Gifford is President at the Progress & Freedom Foundation (www.pff.org) in Washington, D.C. Gifford is the immediate past Chairman of the Colorado Public Utilities Commission. The views expressed here are his own and do not necessarily reflect those of The Progress and Freedom Foundation, its officers or Board of Directors.