Two new studies agree that a la carte would be more expensive for cable TV subscribers, refuting a recent Federal Communications Commission (FCC) analysis, also known as the “Further Report.”
The FCC Media Bureau’s Further Report On the Packaging and Sale of Video Programming Services To the Public, issued in February, found a la carte would lead to consumer savings. The Further Report contradicted a 2005 analysis prepared by Booz Allen Hamilton which concluded a la carte would increase cable prices and diminish consumer choice.
The two latest studies, separately commissioned by the National Cable & Telecommunications Association (NCTA) and Disney, found the assumptions, analysis and conclusions in the FCC’s Further Report are “incorrect, unsubstantiated and severely at odds with the comprehensive analysis” in the Booz report.
The authors of the two new reports, economists Steve Wildman of Michigan State University and Jeffrey Eisenach of economic and regulatory consulting firm CapAnalysis Group LLC, conclude the Further Report is fatally flawed.
Among their charges are that the Further Report presents little factual foundation, relies on speculation and assumptions, overstates the number of a la carte channels consumers would be able to purchase, ignores or mischaracterizes the economic testimony on the benefits of bundling, and ignores nine out of 10 studies submitted by independent economists that conclude an a la carte mandate would harm consumers, and the costs would outweigh any benefits.
The CapAnalysis report blasts the Further report for assuming 1), there is no satellite television; 2), there is no advertising on television; 3), implementing a la carte would be costless; and 4), viewers do not channel surf.
The Further Report made much of a computational flaw in the prior Booz report. Booz itself offered corrections. Wildman found in one of the new reports that those corrections were appropriate, and that after applying them, the effects of the initial error were inconsequential.
Wildman found also that the “themed tier” approach would also be worse for most consumers, in that consumers would have to pay more than they pay today to receive far fewer channels, and it would significantly diminish the quantity, quality, and diversity of programming available to viewers.
The economic studies and biographies of the economists can be found at http://www.ncta.com/ or http://www.media.espn.com/MediaZone/PressKits/NCTA/main.htm.