[Congressional Record Volume 152, Number 71 (Wednesday, June 7, 2006)]
[Senate]
[Pages S5600-S5601]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 3457. A bill to provide a national franchise and other regulatory 
relief to video service providers who offer a-la-carte programming for 
cable television, and for other purposes; to the Committee on Commerce, 
Science, and Transportation. 
  Mr. McCAIN. Mr. President, today I am introducing the Consumers 
Having Options in Cable Entertainment, CHOICE, Act of 2006. This bill 
would encourage broadcasters and cable companies that own cable 
channels to sell their channels individually to subscribers. It would 
also promote cable programming distribution over the Internet.
  For almost 10 years I have supported giving consumers the ability to 
buy cable channels individually, also known as a la carte, to provide 
consumers with more control over the viewing options in their home and 
their monthly cable bill. Cable companies have resisted this and have 
continued to give consumers all the ``choice'' of a North Korean 
election ballot. There is only one option available: buy a package of 
channels, whether you watch all the channels or not. The alternative is 
to not receive cable programming at all. Why have cable companies and 
cable programmers refused to give consumers the ability to buy and pay 
for only those channels consumers watch? Simply because they do not 
have to. They are the only game in town. But not for long, I hope.
  Telephone companies have realized that consumers want more and are 
poised to provide consumers across the nation with an alternative to 
the local cable company. Many of these telephone companies, including 
AT&T, are also ready to offer consumers the ability to purchase 
channels a la carte. Such companies will offer two crucial benefits to 
consumers: more competition in the video service provider market, and 
more options for programming packages. Together, these two offerings 
will allow consumers to have greater control over the content that 
enters the home and the ability to manage their monthly cable bills.
  According to a Government Accountability Office, GAO, report, in 
communities where there are two cable companies competing for 
customers, cable rates are 15 percent less than in communities without 
any competition. A subsequent GAO study suggests that in some markets 
the presence of another cable competitor may reduce rates by an 
astounding 41 percent. Unfortunately, today less than 5 percent of 
communities have two companies competing to provide consumers cable 
television service.
  The CHOICE Act would help bring competition to the cable television 
market. Choice in cable television delivery is long overdue for 
consumers who have suffered steep rate hikes year after year. Since 
1996, cable rates have increased 58 percent or nearly three times the 
rate of inflation. The Federal Communications Commission, FCC, has 
found that rates increased 7 percent in 2001 and 2002, and 5 percent in 
2003. The FCC's most recent report found that rates again rose 5 
percent in 2004, double the rate of inflation, but only 3.6 percent 
where the local cable company faced competition. I can only imagine the 
savings consumers could reap if presented with a choice of providers of 
cable service and a choice of channels. For this reason I call on 
Congress to pass the CHOICE Act.
  A recent USA Today/Gallup poll found that a majority of Americans 
would like to buy cable channels individually and an AP/Ipsos poll 
found that a remarkable 78 percent of Americans would like to do so. 
According to Nielsen Media Research, households receiving more than 70 
channels only watch, on average, about 17 of these. Consumers know that 
they could have greater control over their monthly bill if given the 
ability to choose their channels. This was recently confirmed by the 
FCC. This year the FCC found that consumers could save as much as 13 
percent on their monthly cable bills if they could buy only the 
channels they want.
  Mr. President, consider the situation of a senior citizen on fixed 
income living in Sun City, Arizona, who watches only a few news and 
movie channels, but continues to pay for high priced channels such as 
ESPN, Fox Sports, and MTV--channels that other consumers enjoy, but 
channels that certain seniors may not want and possibly cannot afford. 
In fact, the general manager of the Sun City cable system has told my 
staff that he has tried to drop several expensive music video channels 
from the company's channel lineup to make room for channels his viewers 
want to receive and to decrease costs, but the owners of the music 
video channels have forbid him to do so without serious repercussions. 
So the residents of Sun City continue to subsidize the cost of these 
channels for viewers around the country. That is why AARP, representing 
35 million senior citizens, supports the ability for viewers to buy 
channels on an a la carte

[[Page S5601]]

basis. But again, cable companies don't have to listen to these 35 
million viewers because there is no real threat of losing them. They 
have nowhere to turn.
  The CHOICE ACT, Mr. President, is not a mandate on cable providers. 
Instead it is designed to encourage choice and competition by granting 
significant regulatory relief to video service providers, such as 
telephone and cable companies, that agree to both offer cable channels 
on an a la carte basis to subscribers and to not prohibit any channel 
owned by the video service provider from being sold individually. In 
exchange, video service providers would receive the right to obtain a 
national franchise; would be permitted to pay lower fees to 
municipalities for the use of public rights of way; would benefit from 
a streamlined definition of ``gross video revenue'' for the calculation 
of such fees; and would gain a prohibition on the solicitation of 
institutional networks, in-kind donation, and unlimited public access 
channels.
  In addition, broadcasters that have an ownership stake in a cable 
channel would get the benefit of the FCC's network non-duplications 
rule if the broadcaster does not prohibit the channel from being sold 
individually. The FCC's network non-duplication rule provides 
exclusivity for broadcasters by not allowing another broadcaster with 
the same network affiliation from broadcasting in the same community. 
The bill would also modify Section 616(a) of the Communications Act 
that currently prohibits video service providers from using coercion or 
retaliatory tactics to prevent cable channels from making their 
services available to competing companies to extend this provision to 
distribution over the Internet.
  For example, if Time Warner Cable offered CNN, a cable channel it 
owns, on an a la carte basis to its cable subscribers and allowed other 
cable companies, satellite companies, and video programmers who choose 
to distribute CNN to make it available on an a la carte basis, Time 
Warner Cable would be eligible for a national franchise and other 
regulatory relief. If Disney, which owns ESPN, allowed other cable 
companies, satellite companies, and video programmers who choose to 
distribute ESPN to make it available on an a la carte basis, Disney's 
ABC broadcast stations would have the benefit of the FCC's network non-
duplication rule.
  Mr. President, contrary to what some might want the American people 
to believe, the CHOICE Act does not force video service providers or 
broadcasters to do a single thing. It is their choice whether to act or 
not act. The bill provides them with such a choice even though they 
currently don't provide meaningful choices to their customers. This 
bill is incentive-based legislation that would encourage owners of 
cable channels to make channels available for individual purchase and 
would do nothing to prevent cable companies from continuing to offer a 
bundle of channels or tiers of channels.
  The cable industry regularly touts the value of its package of 
channels, noting that it costs less than taking a family of four to a 
movie or professional sporting event. However, watching cable 
television is not always a family event. Several channels have 
programming that consumers find objectionable or that parents believe 
is unsuitable for young children. Complaints about indecent cable 
programming have increased exponentially in recent years. In 2004, the 
FCC received 700 percent more cable indecency complaints than it 
received in 2003. Most of the cable programs about which indecency 
complaints have been filed with the FCC aired during hours when many 
children are watching television.
  Cable and satellite companies currently provide subscribers with a 
variety of methods of blocking the audio and video programming of any 
channel that they do not wish to receive. However, subscribers are 
still required to pay for these channels that they find objectionable. 
The ``v-chip'' does not effectively protect children from indecent 
programming carried by video programming distributors. Most of the 
television sets currently in use in the United States are not equipped 
with a v-chip; of the 280 million sets currently in United States 
households, approximately 161 million television sets are not equipped 
with a v-chip. Households that have a television set with a v-chip are 
also likely to have one or more sets that are not equipped with a v-
chip.
  Again, Mr. President, I am aware that not all consumers want to block 
and not pay for certain channels, but shouldn't all consumers have the 
choice to do so? Cable programmers and broadcasters have started 
offering individual television programs for download on the Internet. 
This is the purest form of a la carte--where one can watch and pay for 
only specific programs they choose. In addition, many of these same 
broadcasters and cable programmers make their channels available for 
individual purchase in Hong Kong, Canada, and other countries. Why do 
these cable programmers treat the American cable subscriber differently 
than a subscriber in Hong Kong or Canada or an Internet user? It 
remains unclear.
  Lastly, Mr. President, I know that the cable programmers and 
broadcasters will not be the only group that may have some concerns 
with this bill. Many of my friends in local government are also likely 
to be interested in the reduced ``rights of way'' fee and streamlined 
definition of ``gross video revenue'' under this bill. Cable companies 
pay these fees to municipalities to use the right-of-way land under 
sidewalks, streets and bridges to reach customers' homes and then pass 
these fees on to subscribers. However, these fees often surpass the 
costs of managing ``rights of way'' land, and municipalities use these 
funds for other expenditures. Just last month at a hearing before the 
Senate Commerce Committee, Michael A. Guido, Mayor of Dearborn, 
Michigan, confirmed that these fees are often used to pay for other 
city expenses, such as emergency vehicles.
  In 2004, State and local governments collected approximately $2.4 
billion in these fees, slightly more than $37 per year from every 
household subscriber. Americans for Tax Reform believes that the 
``franchise fee is just a stealth tax on our consumption of the cable 
television,'' as do other economists and taxpayer advocacy groups. To 
this end, the legislature in my home state of Arizona just recently 
passed a bill to reduce such fees and taxes on cable television 
subscribers.
  The Phoenix Center, a non-partisan legal and economic think tank, has 
found that the introduction of competition to cable companies could 
allow the fee to be lowered ``significantly without doing any harm to 
local governments.'' Based upon this research, the CHOICE Act would 
reduce the fee from 5 percent to 3.7 percent for eligible video service 
providers and allow local governments to petition the FCC for a higher 
fee if it is necessary to cover the costs of managing ``rights of way'' 
land. I believe this would provide some real cost savings to cable 
subscribers.
  I remain open to working with municipalities on this issue and look 
forward to working with all interested parties to ensure that American 
consumers receive greater options for affordable and acceptable 
television viewing. Mr. President, I hope the introduction of the 
CHOICE Act furthers the debate on the issue of a la carte channel 
selection and I look forward to the Senate's consideration of the bill.
                                 ______