News

Cablers Hit 'Pause' on Tier Moves

12/19/2008 7:00 PM Eastern

The cable industry is responding to those who say the industry is using TV stations' switch to digital this February as a marketing gimmick to coax subscribers into signing up for services they don't need.

All major U.S. cable operators have agreed to stop moving nearly all of their channels from analog to digital tiers during the first two months of 2009 to minimize potential consumer confusion about the federally mandated shutoff of over-the-air analog TV signals on Feb. 17, 2009.

National Cable & Telecommunications Association chief Kyle McSlarrow announced the industry's plan in a letter to key Capitol Hill lawmakers last Tuesday.

NCTA's support for a “quiet period” on channel migrations came at a time of tension with Federal Communications Commission chairman Kevin Martin.

In October, Martin began to investigate whether cable operators were moving channels to digital and then charging consumers to rent digital boxes to maintain access to the same number of channels.

Martin also asked whether cable operators had lowered the price of an analog tier after channels had been moved.

Martin said he was concerned that cable operators were using broadcasters' federally mandated Feb. 17 digital transition to persuade subscribers to lease new equipment or purchase a digital tier. Cable operators, he added, could be fined in some cases.

Cable has been moving channels to digital for years because the retirement of analog bandwidth frees up capacity to offer HD channels, video-on-demand services, and the country's fastest broadband access speeds. Cable's chief competitor — direct broadcaster satellite operators — has been exclusively digital from day one.

“In a marketplace where cable's satellite and telephone competitors already require all of their customers to use digital equipment to receive video programming, it is important that the regulatory framework for cable's digital transition promote a level playing field,” McSlarrow's letter said.

McSlarrow's letter to Capitol Hill outlined other voluntary commitments by the industry, which would appear to address some of Martin's concerns. It was sent to the Democratic and Republican leaders of the commerce committees in the House and Senate.

Under the NCTA plan, cable operators that still have an analog tier in service plan to offer a low-cost basic tier as a one-year promotion, probably something akin to Comcast's $10 a month basic tier offer to new subscribers for one year. Consumers need to sign up for NCTA's low-cost plan from Dec. 31, 2008 to June 30, 2009.

NCTA's plan also addressed analog-only consumers who are upset about renting a digital box to see migrated channels. NCTA's cable-operator members intend to offer subscribers one free device (set-top box or adapter) to view analog channels that have been moved to digital. The device is free for one year for analog-only consumers who request one from March 1, 2009, to June 30, 2009.

The channel migration freeze will begin on Dec. 31. Exceptions to the freeze include cable operators that need to free up channels to comply with FCC rules that require carriage of some local TV stations in analog and digital after Feb. 17.

“We applaud cable operators coming forward to help consumers make the transition to digital television with less confusion and at a lower cost,” the Consumers Union said in a prepared statement. “This initiative is a welcome first step to help consumers navigate a costly maze of confusion surrounding the DTV transition. While the cable effort doesn't resolve long-term consumer problems with high prices and discriminatory practices, it should offer welcome short-term relief to many consumers.”

The channel migration freeze came with some caveats.

Cable operators that have contractual obligations to move channels and operators that gave notice to customers about such moves prior to Dec. 10 won't be covered by the freeze commitment.

NCTA's cable operators serve more than 90% of cable TV households and the trade group also has more than 200 cable program network members.

September