US Seen Unlikely To Follow Canada on a la Carte Cable

The Canadian Radio-television and Telecommunications Commission (CRTC) in March 2015 put out its "Let's Talk TV" rules requiring cable distributors to offer a small basic service package costing no more than $25/month, not including equipment costs, and to let subscribers add to that on a bundled or a la carte basis. The basic package must include local, regional, public interest, educational and community channels, CRTC said.

The new rules set a March 1 deadline for cable companies to offer video in small packages or a la carte, Canadian Cable Systems Alliance (CCSA) President Alyson Townsend told us. Cable company response "is all over the map," with various mixes of small packages and a la carte offerings, including different approaches on whether to include U.S. network affiliates in their basic packages, she said. By year's end, cable distributors have to provide programming beyond basic service both a la carte and in skinny bundles, she said.

Such a rules approach seems highly unlikely in the U.S. One cable industry lawyer told us the U.S. cable industry for years has assumed any a la carte mandate would have to come from Congress since the FCC seemingly doesn't have authority to pre-empt programming agreements that require bundles. There have been no signs the FCC is agitating for such legislation because it seems more focused on matters like set-top box rules reform and because that and the general industry trend for skinnier bundles point to more consumer choice and thus less need for a la carte offerings, the lawyer said. The FCC didn't comment.

Former Senate Commerce Committee Chairman John McCain, R-Ariz., who introduced the TV Consumer Freedom Act (S-912) in 2013, which would compel the choice of a la carte offerings for cable and satellite providers, didn't comment on possible reintroduction of the legislation. He told us last summer that evolving technology may have resolved his concerns (see 1508100034).

Townsend said some U.S. programmers brought up issues of CRTC jurisdiction, but the regulator said it expected them to follow the Let's Talk TV rules. "No one has pushed it to the limit yet [though] they might," she said. "What I see is the American programmers are generally trying to be good corporate citizens and satisfy the commission."

U.S. cable programmers lobbied against the Canadian a la carte rules when they were being formulated. A&E Networks President-Distribution David Zagin in a 2014 letter to the CRTC warned of "adverse effects to the Canadian broadcasting and production industry." He also predicted "less consumer choice as many programming services currently offered will not be able to sustain themselves." A&E didn't comment for this report. In a separate CRTC letter in 2014, Viacom Senior Vice President-Government Relations Keith Murphy called the a la carte rules "a consumer welfare destroying death spiral." Likening the packaging of channels to the selling of crayons -- "it is in the best interest of the buyer and the seller to include more choices in the box and packages" -- Murphy said a la carte and skinny bundle requirements "will reduce revenues and increase costs of programming services, leading to less production, lower quality and the withdrawal of some programming services from the market." Viacom didn't comment Friday.

When asked about a la carte rules, NCTA in a statement said it "has always supported marketplace solutions that provide consumers a wide variety of ways to buy and view content, including a la carte, and that is exactly what is happening today, all without the need for government intervention. Whether it is skinny bundles, streaming services, purchasing single shows or seasons via iTunes and elsewhere, choice in the way consumers buy and view programming is abundant and increasing all the time." In a statement Friday, Comcast said, "Nearly all research has shown that customers get less and pay more in an a la carte world, and could significantly harm smaller and diverse programmers, and we don’t believe government mandates in this area are the way to go. The market place is giving consumers content in all different forms through many different services, and without government mandates."

Canadian consumers had been requesting a la carte for years, and the then-ruling Conservative Party and now-ruling Liberal Party, which also supports the rules, "are rallying behind the consumer," Townsend said. While small cable operators like CCSA members supported the a la carte regime, some vertically integrated large cable companies "were not all that keen," Townsend said. "For us it was something we'd wanted for a long time and had been lobbying for."

"At first there was a bit of disappointment" among consumers, Townsend said. "They didn't really understand skinny basic wasn't everything basic was before [but] at $25." Meanwhile, she said, the dissolving of programming bundles will undoubtedly mean some cable networks don't survive, though those programs could end up going over-the-top: "Isn't that the proper thing? Cable's not the only game in town." A spokesman for cable operator Cogeco Connexion said it's too early to tell how Canadian consumers are reacting to the offering.