The FCC & Regulating Cable
         August 2005

Cable companies worried about a regulatory clampdown on their industry met the new Federal Communications Commission chairman today and got good news. "I prefer markets and competition to regulation whenever possible," FCC Chairman Kevin J. Martin told the annual cable industry convention here. "Competition first, then regulation."

Now Martin's comments come as parent groups and others press Congress to take action against cable television firms for airing risqué fare and for doing too little to rein in price hikes, which have outpaced inflation over the past decade. Sen. Ted Stevens (R-Alaska) has floated the idea of extending the FCC's authority over indecency on the public airwaves to cable and satellite channels, while Sen. John McCain (R-Ariz.) and groups such as Consumers Union have advocated a system allowing subscribers to pay for only the channels they want.

The cable industry has opposed both proposals, saying existing parental controls are sufficient for blocking adult content from children and an a la carte system would eventually drive up consumer cost. Martin favors establishing a "family tier" system for cable that would allow families to purchase a package of child-friendly channels, such as the Disney Channel and Viacom Inc.'s Nickelodeon, and avoid saltier offerings. "That's one of several tools" available to the cable industry, Martin said in an interview. He said the cable industry has an "opportunity to step up to the plate and address these issues" to head off regulation. Martin spoke briefly with Robert A. Iger, co-chief executive of the Walt Disney Co., at Tuesday's show.

In an interview afterward, Iger disagreed that creating a family tier is the "right solution." A la carte, Iger said, "sounds good at first blush" but would eventually drive up consumer prices. In a study last year, the FCC said an a la carte price system may cost consumers more, but the additional consumer choice may offset any price hike. The heads of two major cable operators were resistant to the idea of a family tier in questioning after a panel discussion in the morning. "We have great tools already" to block unwanted channels, said Glenn A. Britt, chairman of Time Warner Cable, which has 11 million subscribers. "We need to do a better job of educating customers that they are available."

James O. Robbins, president of Cox Communications Inc., with 6 million subscribers, said a family tier would be a "slippery slope" toward additional government regulation of content. "Who would decide what's on the family tier?" Britt asked. "What criteria would be used? How do the economics work? It's an idea, and it may be what happens, but there's a whole lot of details" undecided.

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