Small Cable Companies, Indie Networks Ask FCC To Force Channel Unbundling

As cable packages have ballooned in both volume and price over the years, a growing segment of consumers has demanded options for unbundled, choose-your-own-channels cable. So far, those cries have gone largely unheard, except for a few streaming, internet-based options. However, it seems the à la carte option has a growing fan base clamoring to be heard: small cable companies themselves.

That’s the gist of a recent filing the American Cable Association has made with the FCC.

While the ACA membership roster does include some large companies like Comcast and Viacom, it also includes hundreds of smaller cable advertising, programming, and distribution companies. It is on behalf of those small companies that ACA — joined by independent channels Mav TV, Ride TV, and One America News Network — filed its comment [PDF].

You know how when you subscribe to cable, you don’t just get Network X, but also Network X1, Network X2, Netwok X3, and so on? That’s bundling, and it’s basically integral to TV distribution at this point.

Here’s how it works: a content company works out an agreement with a distribution company to get its channels in front of subscribers’ eyeballs. Cable Company A agrees to pay Network B a certain sum — say, $0.25 per month per subscriber who receives the channel — in order to distribute that channel on its service.

In theory, this benefits both parties: a consumer isn’t going to sign up for a cable package that doesn’t have any channels in it, so this brings in viewers. And it’s a revenue stream for the network, which they like because business is all about making money.

But over time, those agreements have continued to grow bigger and more unwieldy. Now, a company that owns 15 cable networks might say, “We’ll grant you carriage of our flagship network for a discounted price of $1 per head, but in return you have to carry our other 14 channels for $0.01 to $0.20 each, as well.”

The numbers, of course, vary widely, but the principle is the same.

An enormous company like Comcast — which is both the cable distribution company, and also owns the entire NBCUniversal family of networks — has the clout to demand good terms, and the budget to move some cash around to make deals work out as needed. But the ACA and the independent networks say that this kind of bundling is killing them, and “represents by far the greatest threat to the viability of independent programming.”

“The largest programmers universally bundle their most desirable channels with programming that is little watched and overpriced, requiring MVPDs [cable and satellite companies] to take all the channels or get none of them,” the ACA writes. “To obtain must-have programming, MVPDs must set aside huge amounts of their limited bandwidth and programming budgets to carry dozens of bundled channels in which they (and their subscribers) have no interest.”

The comment provides one example: “a small cable operator who wants to get the must-have programming from nine of the largest media groups — Disney/ESPN, Fox, Comcast/NBCU, Turner, Viacom, AETN, AMC, Discovery, and Scripps … must carry 65 channels at a minimum.”

A company with 250,000 subscribers doesn’t have the same kind of cash to throw around as one with 25 million, nor does it have the same negotiating leverage to convince the content company to take a lower fee. If carriers are forced into agreements of this type, then there’s simply no money left to give a fair deal to an independent network that isn’t part of a media conglomerate. Nor is money the only problem: distribution of digital cable takes bandwidth, and while, again, that’s not a problem for a behemoth like Comcast or Charter, carrying excess channels can actually overtax the network of a small enough provider and prevent it from carrying alternative traffic.

The FCC proceeding to which the comment was filed seeks input on rules around two kinds of broadcasting agreements: most favored nation (MFN) clauses, and the alternative distribution method (ADM) provisions. The ACA does encourage the Commission to revamp those, but says doing that alone simply doesn’t go far enough.

Failing in some way to address the issue of bundling, the ACA says, will make the rest of the rulemaking procedure effectively moot, and so it “urges the Commission to include regulations limiting forced bundling by programmers in the rules adopted through this proceeding.” The comment did not, however, specify in what way the FCC should do so.