Forcing consumers to buy prepackaged tiers of bundled TV channels is a violation of trade and anti-trust laws, contends a lawsuit filed in the federal court against media companies and cable/satellite TV providers.
The complaint, filed by Los Angeles lawyers Maxwell Blecher and David Kesselman on behalf of nine plaintiffs, names broadcasters Time Warner Cable, Comcast, Cox Communications, DirecTV, Echostar Satellite and Cablevision. It also names programmers NBC Universal, Viacom, Walt Disney, Fox Entertainment and Time Warner.
The lawyers hope to have the action accepted as a class action “on behalf of all consumers in the United States who, during the last four years, have paid for ‘expanded basic cable’ subscriptions,” said a statement by the law firm, Blecher & Collins.
The toughest part of the litigation is likely to be getting the class action certification, Blecher told the E-Commerce Times.
“The first — and frankly the most arduous — part is getting the class action,” he said. “I think winning the case on its merits isn’t going to be too hard, but the class issues will be Iwo Jima.”
Most of the contracts between consumers and the providers have arbitration clauses, so the defendants are likely to “argue about whether we can be in court at all and then they will say, ‘there are 80 million people who have subscriptions so a class action is not manageable,'” Blecher said.
The defendants have “endless budgets, which they will probably exceed” to fight the lawsuit, he said.
All or Nothing
The complaint challenges “industry-wide agreements and practices that effectively mandate that consumers must purchase prepackaged tiers of bundled cable channels and cannot purchase channels or programming on an ‘a la carte’ basis,” Blecher and Collins said.
This bundling, which forces many people to pay for stations they don’t want and never watch, amounts to monopolization, an unlawful restraint of trade that violates federal antitrust laws, the complaint asserts.
TV programmers, (NBC, Viacom, Disney, Fox, and Time Warner), “with knowledge that the other programmer defendants operate in the same manner,” only sell or license most of their programming or channels as packages, the suit contends. Known in the industry as “block booking” or “tying,” these arrangements require the cable and satellite companies to buy channels they would otherwise reject or negotiate for on a one-by-one basis.
“The cable/satellite defendants, in turn, repackage and distribute the channels to the consuming public in bundled tiers of channels,” said the lawyers. “The cable/satellite defendants do not offer ‘expanded basic’ channels to consumers on an ‘a la carte’ basis. This deprives consumers of choice and, because many consumers have no interest in the vast majority of channels they are forced to purchase on expanded basic cable, consumers pay a significant overcharge.”
On the Other Hand
Technical issues will likely be one line of defense, Blecher said. Additionally, the defense probably will argue that an a la carte arrangement will increase the cost to consumers and “diminish the ability of new programmers to get on the cable.”
The lawyer said he is initially relying on a Federal Communications Commission (FCC) study that found consumers are charged about $100 million yearly for channels they would not buy if they had the opportunity to choose on an a la carte basis.
However, those who support the lawsuit might not understand the ramifications, said Bob Thompson, Director of The Center for the Study of Popular Television at Syracuse University’s S.I. Newhouse School of Public Communications.
“What a lot of people don’t realize is if they got what they wanted, a lot of their favorite cable services would disappear,” Thompson told the E-Commerce Times. “Each household has some favorite specialty niche channels that don’t get lots of audience. These get subsidized by the overall block bundle system. If every channel had to compete in the marketplace … a lot of stuff would disappear.”
Thompson also said a la carte could be taken further, tossing “an enormous number of wrenches” into the system. “I suppose you could make the argument on a program-by-program basis,” he said. “If I only like ‘Show X,’ why am I paying for 24 hours of service? To some extent, the extreme logic of this would lead to paying only for the programs we use.”
In Oct 2007 I found out by accident what many are just now finding out… the cable industry (Comcast is my local provider) has designed a strategy that will create windfall profits only paralleled by the gas companies.
What I found out that October was that the lower channel (1-99) were going to trimmed to only a few channels.
The reason? So that every single TV would need a $5 to $8 converter box to get the "enhanced" service.
My response was immediate. I wrote an email to all my friends and included my local Congressman and Senator. The silence was deafening EXCEPT from Comcast. I received a call from a very nice women from the corporate office and to make a long story short confirmed the plan. Not a single newspaper or consumer advocate cared.
So aside from a TERRIBLE remote, slow responding cable box, price increases (3x last year alone?) lets just do the simple math… maybe you’ll begin to see (and do something about)just how you’re about to see a BIG % increase in your cable bills :
One Possible EXAMPLE:
$10 Cost to manufacture (non-hi def) cable box
$8 MONTHLY RENTAL FEE OF THAT BOX
3 AVERAGE NUMBER OF TELEVISION PER HOUSEHOLD
23,000,000 Comcast cable customers
multiplied by $24 PER MONTH – EVERY MONTH
$552,000,000 MONTHLY WINDFALL TO Cable tv!
$6.5 BILLION A YEAR
If I could afford it I might buy their stock.
Oh well – already learned my lesson there – the little guy takes the risk and loses, the big guy gets rich and walks away.