Cable and Satellite Television Tiering and a la Carte Options for Consumers: Issues for Congress

Publication Date: June 2004

Publisher: Library of Congress. Congressional Research Service

Author(s):

Research Area: Media, telecommunications, and information

Type:

Abstract:

Multi-channel (cable and satellite) television is the single largest component of the entertainment sector, generating $48.6 billion in residential subscription revenues and an additional $15.0 billion in advertising revenues in 2002. It is a major source of news and informational programming and diverse entertainment programming, including niche programming. Some consumer advocates complain, however, that, as a result of the industry-wide practice of offering almost all advertiser-supported cable networks in a single tier only, consumers are forced to purchase networks they are not interested in receiving in order to obtain the networks they want. For example, in order for consumers to obtain desired children's networks, such as Nickelodeon or Discovery Kids, they must purchase the expanded basic service tier that includes networks whose programming some consider not of interest or objectionable. These advocates claim consumers would be better off if they had the option to purchase just the individual cable networks they want (this is frequently referred to as "a la carte" purchasing) or, at the least, to purchase smaller tiers that include fewer of the cable networks they do not want.

The large cable programmers, who provide most of the popular cable (and broadcast) television programming, respond that a single large expanded basic service tier represents the most efficient way to offer programming and that allowing customers to obtain networks on an a la carte basis or in small tiers would raise costs ­ and hence prices to consumers ­ and also reduce the diversity of programs offered, so that consumer welfare would suffer in the long run. They claim a single large tier reduces the risks associated with introducing new cable networks and helps support niche networks.

Several proposals have been made to Congress that are, in effect, variations on the theme that subscribers should have greater decision-making power over the cable networks they receive. The various proposals would: prohibit programmers from requiring cable and satellite operators to carry their less popular networks in order to attain access to their popular networks, and ­ more specifically ­ prohibit programmers that own broadcast stations from tying the retransmission consent they give cable and satellite operators to carry their broadcast programming to the carriage of the programmers' cable networks; prohibit programmers from requiring cable and satellite operators to offer the programmers' networks in the expanded basic service tier only; require cable and satellite operators to offer subscribers the options of purchasing smaller program tiers or purchasing networks a la carte; and require sports programmers and cable and satellite operators to offer expensive sports programming on a separate tier. In response to requests from key members of the House and Senate Commerce committees, the Federal Communications Commission has opened a docket seeking factual information on the potential merits and drawbacks of making networks available to subscribers on an a la carte or themed-tier basis. In this report, the pros and cons of offering subscribers only a single large expanded basic service tier and also of the various proposals to provide consumers more options are presented. This report will be updated as events warrant.