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McCain: Pay TV Business Is Rigged Against Consumers

GOP senator uses Senate subcommittee hearing to push a la carte legislation

Sen. John McCain (R-Arizona) tubthumped his proposed legislation to force pay TV providers to give Americans the option to buy cable TV channels individually, calling the system “rigged” against consumers.

“I truly believe a lot of Americans are fed up with the size of their cable bill,” said McCain, testifying before the Senate Subcommittee on Communications, Technology and the Internet’s “State of Video” hearing Tuesday morning.

McCain’s Television Consumer Freedom Act of 2013 bill, introduced last week, would encourage wholesale and retail unbundling of TV programming, penalize broadcasters if they “downgrade” their over-the-air service and eliminate the sports-blackout rule for events held in publicly financed stadiums.

“A la carte options are the right thing to do, in large part because of dramatically rising cable prices, which exceed the cost of living,” the senator said.

McCain called out sports as a key culprit for rising pay TV bills, which he pointed out have risen 6.1% annually for the last 16 years. “I’d never go without ESPN, but the fact is the majority of consumers have no interest in sports programming and shouldn’t be forced to pay for it.”

Analysts are doubtful McCain’s a la carte bill will go anywhere, citing staunch industry resistance and lack of co-sponsors for the legislation.

Also speaking at the hearing was Michael Powell, head of cable trade group National Cable & Telecommunications Assn., who disputed the notion that government-mandated a la carte is needed.

“It’s a very serious question mark whether consumers would have lower bills or cheaper service as a result of a la carte,” he said, citing past studies including one by the Federal Communications Commission in 2004. Powell also said the cable model supports a wide range of niche-interest channels that potentially “wouldn’t be able to survive on their own.”

While Powell said the 1992 Cable Act that governs the industry is “frayed” and “increasingly incomplete and out of sync” with the market, he said now is not the time for a comprehensive rewrite of the law.

“While some surgical changes to the law may be appropriate, a broad rewrite is not necessary and could even be counterproductive by introducing uncertainty and displacing or skewing the marketplace rivalries” that provide “unparalleled choice” to consumers, Powell said in his prepared remarks.

Consumer-interest activist group Public Knowledge supports McCain’s bill, which wouldn’t outlaw TV bundles but would simply give people choice, said senior staff attorney John Bergmayer.

“There’s room in the marketplace for bundles of content,” Bergmayer said, noting that Netflix’s service provides a bundle of content for a fixed price. “What people want is a lot more choice. It’s not bundles per se — it’s the feeling that they’re getting ripped off.”

Dish Network exec veep and general counsel R. Stanton Dodge fingered TV broadcasters as partly to blame for higher bills, telling subcommittee members that pay TV providers need protection against demands for higher retransmission fees. Standoffs between cable and satellite operators and broadcasters have resulted in 91 local TV blackouts in 2012, up from 12 in 2010.

“Consumers are the victims of these one-sided negotiations,” Dodge said.

National Assn. of Broadcasters topper Gordon Smith disputed that, saying broadcast TV represents just a few pennies of every dollar on a pay TV bill. “I understand why some on this panel don’t want to pay for broadcast TV… but it’s the most valuable content they’ve got,” he  said. “We’re not the driver driving up the costs — we’re one piece of that.”

After hearing the testimony, subcommittee member Sen. Ron Johnson (R.-Wisconsin) said, “What I’m getting the sense of from the people on the panel is, we should proceed cautiously… We don’t want to screw it up.”

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