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Industry assaults program bundling

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In a Senate hearing on indecency today, several telecom industry representatives came out against the practice of video programmers requiring cable operators and other providers to carry packages of channels on their basic tiers and not allowing a la carte offerings.

FCC Chairman Kevin Martin packed perhaps the biggest punch today when he suggested that cable and satellite operators offer programming on a per-channel basis, a model that programmers have fought hard against. Among the options Martin presented was one that would require subscribers to take a basic package of all must-carry networks.

“Parents could then be permitted to opt out of cable programming, requesting not to receive certain cable channels and having their package price reduced accordingly,” he said. “Alternatively, parents could be allowed to opt in to particular cable programs beyond the basic package, which still would include broadcast must-carry stations.”

Alternatively he suggested offering a set number of channels for a set price, such as 10 channels for $10 per month.

Martin’s comments came after he asked the FCC’s Media Bureau to review a report completed under former FCC Chairman Michael Powell that claimed moving to a la carte programming would increase costs for consumers and be economically unfeasible for programmers. That report, according to Martin, was based on several flawed assumptions including that a move to a la carte pricing would cause consumers to watch nearly 25% less television.

At the hearing, Matthew Polka, president and CEO of the American Cable Association, which represents smaller cable operators and telcos that do not own programming entities, said giving service providers the ability to provide a la carte channels would free many of his associations members from being forced to carry objectionable channels.

“My answer is to allow local cable operators more flexibility in packaging their programming,” he said, noting that in many cases, programmers require cable operators to carry bundles of channels that appeal to completely different demographics. “This is essentially a local concern.”

Ed Merlis, senior vice president of government and regulatory affairs, for the U.S. Telephone Association, didn’t take a position on any particular issue, but said telcos are taking their new responsibilities as video providers very seriously.

“It’s not only the right thing to do, it makes business sense,” he said.

Among large carriers, SBC previously was vocal on its desire to offer a la carte programming, however, more recently the company has backed off the issue. Verizon, Qwest and BellSouth, all of which have been offering some form of video, have followed more of the traditional cable models by providing tiers of services.

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