June 4, 2007

Cable À La Carte Pricing Creates More Problems Than It Solves

Strict À La Carte Will Confuse Consumers And Fail To Achieve Desired Outcomes

by James L. McQuivey, Ph.D.

with Remy Fiorentino, Bradford J. Holmes, Heidi Lo

Executive Summary (This is a document excerpt)

In late April, FCC Chairman Kevin J. Martin trumpeted one of his favorite ideas: à la carte cable pricing, wherein consumers choose which cable channels they want rather than accepting the bundles that cable providers offer. It sounds like a sensible idea until you ask consumers what they would do with the option. Only half are interested, but their estimates of what they would pay aren't realistic. On average, current cable subscribers said that they would only spend $24 a month on 26 channels, 53% less money than they pay today to get one-fourth the number of channels. To satisfy the FCC and avoid legislation that would disorient consumers, cable operators should offer the benefits of à la carte pricing through smarter bundling of family, sports, or news programming in addition to traditional tiered packages.

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