Two of the most powerful senators in Washington have an idea that could change the economics of TV for good.
The plan, proposed Friday by Sens. Jay Rockefeller (D-W. Va.) and John Thune (R-S.D.), would let TV viewers individually decide which broadcast channels they want to receive in their cable subscriptions. You could, for example, opt to receive ABC and NBC but not CBS. Consumers would then be billed directly for those individual channels, essentially establishing an a la carte system for broadcast TV.
While the proposal known as "Local Choice" isn't expected to pass this year, it sets the stage for potential legislative action in 2015. Insiders say that Local Choice could even be a stepping stone to consumers' long-awaited Holy Grail: an unbundling of all the channels offered on cable. That would be a much more contentious fight, and pretty much everything about this plan is a long shot right now. But there are some good reasons to think the basic concept might gain traction in the coming months. Here's why.
To be clear, the plan put forward by Rockefeller and Thune wouldn't add to the fees that cable viewers pay on a monthly basis. Instead, the licensing fees currently paid by cable companies to broadcasters would be passed along to consumers, who could then decide whether they'd like to pay those fees.
The idea could fundamentally change how pay-TV works by substantially changing the system of "retransmission consent" that figures so prominently in the relationship between programmers and cable companies. First, ending the cable companies' role as a middleman between viewer and broadcaster would eliminate the contracting disputes behind programming blackouts like last year's CBS-Time Warner Cable outage. When the two parties disagreed about how much Time Warner Cable (TWC) would pay CBS for the right to carry CBS shows like "Under the Dome," those shows went off the air for TWC customers. Under this new Senate proposal, those disputes would no longer happen, because CBS would be dealing directly with consumers instead.
Second, by paying for broadcast content themselves, consumers would have a better idea of how much that programming is actually worth. The licensing fees for each channel would be broken out on your cable bill rather than masked by one single price tag. Being able to pick and choose which networks to subscribe to would also force broadcasters to compete more directly for viewers. (The broadcast industry hinted on Friday that it was aligned against the Local Choice proposal, saying the idea needed more "thorough review" than there was time for in this Congress.)
Third, consumers could more easily compare broadcast fees against the cost of cable programming. Data from the research firm SNL Kagan shows that cable companies pay ESPN more than $6 a month per subscriber, which according to analysts is higher than the rates charged by broadcasters even though ESPN has fewer viewers. (Of course, the fact that cable companies are willing to pay so much to carry live sports is an indication of how valuable the service is.)
All these potential benefits for consumers (read: voters) make the Local Choice proposal "politically elegant," said Paul Gallant, a telecom analyst at Guggenheim Securities. Gallant added that an unbundling of broadcast channels could set a precedent for the eventual unbundling of cable, too.
“If broadcast channel unbundling actually happened, it’s not crazy to think that consumers might want Congress to unbundle the rest of the cable channel lineup," he said. "But content companies like the current system and probably want to avoid any discussion of a la carte legislation.”
Most affected would be large programmers and cable companies that own programming themselves, said Matt Polka, the chief executive of the American Cable Association, which represents independent cable companies. Smaller companies like those Polka represents might benefit.
"Our members would like to give customers more choice but can't, because of those that own content who won't allow it."
It's premature to expect that Local Choice will have much of an impact anytime soon, let alone successfully create an a la carte system for the entire cable industry. Some of Local Choice's fate hangs partly on the outcome of the 2014 midterm elections, too. But the idea is out there.