EXCLUSIVE: FCC chief slams cable rates

NEWSMAKER INTERVIEW:

The nation’s top media regulator says he doesn’t have the power to solve the “single biggest problem” facing media consumers and isn’t counting on Congress to act any time soon.

But Federal Communications Commission Chairman Kevin J. Martin said the inability of cable subscribers to choose among channels is keeping prices high and is a sign that the market isn’t working.

“Today, consumers pay double what they paid less than a decade ago and they have fewer choices, not more, and they have to buy a bigger and bigger bundle of services if they want to get anything,” Mr. Martin told editors and reporters at The Washington Times on Tuesday. “If you want to buy the Discovery Channel for your children, you have to buy a package that includes a whole bunch of channels that you don’t want.”

Mr. Martin said the prices of other communications services - such as wireless access or international calling - have fallen in the past decade, but cable is an exception. In that time, cable channels have doubled, but the average number of channels that subscribers watch has increased only from 13 to 15, he said, pointing to Nielsen Media Research statistics.

The Republican head of the five-member media-regulating agency said the FCC’s job is to promote competition, “but we have to acknowledge when it doesn’t seem to be working.” Satellite TV providers don’t create an “effective price constraint” because they typically price their services on a national basis - making it harder to compete with regional cable firms - and residents of apartment buildings are often unable to hook up to satellite dishes, he said.

“One of the things that’s most disturbing, I think, and should send a red flag to any government official and to anybody when they’re looking at industries is when people are trying to hide information from customers,” Mr. Martin said about the cable industry’s lack of disclosing per-channel prices. “For a market to be efficiently working, people have to be making knowing choices and those choices have to have real economic consequences.”

The solution, he said, is an “a la carte” pricing regime in which subscribers could opt out of channels they don’t want and pay only for the channels they receive. Various a la carte systems have been adopted in Canada, Singapore and Hong Kong.

Mr. Martin, who has been pushing for such a measure for years, acknowledged that it faces an uphill battle because it would require an act of Congress and the cable industry is strongly opposed to the idea.

Watch an interview of FCC Chairman Kevin J. Martin here:

“With no credible economic evidence showing that government mandated a la carte will reduce the price of video service for the majority of Americans, and substantial evidence to the contrary, the government shouldn’t interfere with a marketplace that provides the most diverse programming anywhere in the world,” said Brian Dietz, a spokesman for the National Cable and Telecommunications Association (NCTA).

The trade group has criticized Mr. Martin for failing to account for increases in the quality of cable programming they say justify higher fees, including high-definition and on-demand offerings as well as additional channels. The NCTA has said the cost of cable has fallen when adjusted for inflation and quality.

In the wide-ranging interview, Mr. Martin repeated his support for the commission’s efforts to punish broadcasters for airing fleeting expletives. This fall, the U.S. Supreme Court is revisiting broadcast indecency rules for the first time in 30 years in response to the FCC’s appeal of an lower court’s ruling that its policy is “arbitrary and capricious.”

House Democrats, led by Rep. John D. Dingell of Michigan, is investigating Mr. Martin’s management of the FCC for a “possible abuse of power” and a failure to operate openly. Mr. Martin, however, said his leadership has been no different from that of previous FCC chairmen of both parties.

“I’ve also told the other commissioners I’m happy to end up releasing to the public when anybody votes,” but his colleagues don’t want to, he said. Commissioners vote on items at public meetings or via an internal electronic system.

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