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The way television channels are distributed, most viewers get unwanted channels
[April 11, 2010]

The way television channels are distributed, most viewers get unwanted channels


Apr 11, 2010 (Public Opinion - McClatchy-Tribune Information Services via COMTEX) -- Nancy Justice estimates she gets between 250 and 300 channels through her satellite television provider.

Of those channels, the Mercersburg resident said she probably watches only three or four.

"I've been thinking about canceling, because it's ridiculous we pay so much," Justice said.

The cost of cable and satellite TV has increased more than 40 percent over the past decade, faster than the overall rate of inflation, according to the Bureau of Labor Statistics.

While subscribers have access to more channels than ever before, the average household only watches about 15 to 17 channels.

Justice said she would buy channels individually if it were possible and cheaper than her current service.

An "a la carte" system has never caught on, though, largely because cable and satellite providers say it would actually raise costs for viewers.

"It seems counter-intuitive," said Matt Jackson, head of the Department of Telecommunications at Penn State University. "If I just wanted to pay for the ones I want, shouldn't that be cheaper? The reason it's not is because of the way the cable industry revenues are structured." Cable and satellite providers pay a license fee to carry a network, often around 25 or 30 cents per subscriber per month, Jackson said. Some networks -- ESPN, in particular -- are much more expensive.



Most networks depend on a dual revenue stream made up of these fees and revenue from advertising.

Providers say that if channels were sold individually, this would make it harder for networks to attract advertisers and more expensive to market their channels to viewers, forcing them to increase license fees to make up for lower ad revenue and increased marketing expenses.


A la carte Kevin Friedman, founder of TValacarte.org, is skeptical that retail prices would actually increase under an a la carte system.

He said even if networks increased their license fees, viewers only watch about 16 channels, so providers would not pay fees for all the channels viewers never buy.

Friedman believes the price of a channel should be determined by what consumers will pay, not by a deal negotiated between networks and the cable and satellite providers.

"They (the networks) should charge whatever rate will optimize their profits," Friedman said. "If ESPN charges $4 on the wholesale market, and they increase it three times, I don't know that many viewers will pay that much for it." The concept of an a la carte system -- where customers could pick only the channels they want -- has been discussed for years but has met strong resistance from the television industry.

The industry contends on top of raising prices to customers, a la carte would also make it harder for niche channels to survive, and subsequently create less diversity of programming.

Joy Sims, spokesperson for the National Cable & Telecommunications Association, the trade group representing the cable industry, said that while subscriber rates have increased over the years, so have the number of offerings available to customers.

In 1985, the average household received just 18.8 channels, according to The Nielsen Co. Now that number has grown to more than 100, but studies still indicate most only watch about 15 to 17 channels.

Chastity Mackey of Chambersburg said she gets "a lot " of channels through her cable provider, but the actual number that she watches is "probably not that many." "Half the time there's nothing on," she said. "The kids watch Nickelodeon. We don't watch too much." If an a la carte service existed, she said she would probably purchase channels individually -- but only if it costs less than what she's paying now.

Tier system Cable companies are generally required by the FCC to offer a basic service tier, which includes, at minimum, the local broadcast stations and the public access channels. Subscribers are generally required to purchase a basic tier before buying additional video programming.

Providers say the tier system is the most cost-effective delivery method -- and also accommodates different viewing tastes within the family -- but there will inevitably be channels that are not watched, and others that are not included in a certain tier.

Tom Boock, owner of The Cottage Pub & Restaurant in Chambersburg, has cable service year-round but also picks up satellite service a few months of the year, including March Madness.

"I would probably be happy to pick and choose the channels I wanted, but then again, something will come up we would like to have and we don't have that channel," Boock said. "I've had to make phone calls at the last minute to pick up the Big 10 Network because something came on that we didn't have otherwise." The future of TV Currently, cable providers may offer a la carte, but they are not required to.

The previous FCC chairman was a proponent a la carte programming, but Jackson said the current administration is more focused on broadband issues than traditional TV.

Still, Friedman is optimistic that customers will some day be able to buy only the channels they want. He said there is growing public interest in an a la carte system.

"I think we should start to reward quality TV. How we do that is by finding channels that are creating the best content. Each household should select the channels instead of the cable or satellite provider," Friedman said.

The TV has become the centerpiece of almost every living room -- and most families have more than one TV in the home -- but video programming continues to migrate online.

Jackson said some younger viewers are canceling their paid television subscription service in favor of online video services.

Sites such as Hulu.com offer popular on-demand shows for free, and sports leagues like Major League Baseball and the National Hockey League allow people to watch games online for a fee.

Jackson said online sites like these are "the ultimate a la carte." "Clearly it seems where most things are going is to an on-demand type of delivery system. There are some exceptions: sports, news, live events -- much of their value is derived from the timeliness in which it's delivered," Jackson said. "But for most sitcoms, talk shows, reality shows, much of that could easily be delivered as Internet capacity increases. This is where I think people are heading." ------ Marcus Rauhut can be reached at [email protected] or 262-4752.

To see more of the Public Opinion, or to subscribe to the newspaper, go to http://www.publicopiniononline.com. Copyright (c) 2010, Public Opinion, Chambersburg, Pa. Distributed by McClatchy-Tribune Information Services. For reprints, email [email protected], call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

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