Canadian Lawmakers to Introduce "A La Carte" Plan

With the caveat that lots of bills get introduced into national legislatures, with no chance of enactment, Canadian Parliament legislation to mandate a la carte retail packaging of video entertainment channels appears headed for introduction.

The legislation would mandate that video service providers provide a la carte video options for consumers of cable and satellite TV services.

The Canadian Radio-television and Telecommunications Commission already in 2011 had urged cable and satellite companies to adopt the a la carte pricing model.

If the legislation passes--there is no certainty about passage--it would provide a test of the economics of such unbundling, as well as a test of consumer appetite, that would certainly have at least some repercussions in the U.S. market as well. 

Nobody can be sure precisely what would happen to service provider and content provider revenues is such a change were to be made. 

There is a huge disconnect between consumer and content owner or service provider expectations about what a TV channel should cost, if it were possible to buy channels one by one. Consumers think they will save money; distributors and content owners are just as certain they would not save money.

A study by PricewaterhouseCoopers indicates that 44 percent of consumers would like a the ability to buy all their channels one at a time.

But it is not clear that the economics of the video subscription business can match consumer expectations about the retail price of a single channel. 

The expected pricing “per channel” is where the biggest disconnect exists. About 16 percent of respondents say they would not pay more than 99 cents a month for a channel. Some 24 percent will pay $1.99 and 22 percent will pay $2.99.

Studies by the Federal Communications Commission seem to have concluded that unbundling could save money, or wouldn't save money, depending on how many channels a consumer buys under an a la carte regime, compared to what they buy now.

One of the studies suggested “consumers that purchase at least nine networks would likely face an increase in their monthly bills" when buying a la carte.

Likewise, one of the FCC studies suggested bill increases ranging from 14 percent to 30 percent under a la carte, while the other suggests a consumer purchasing 11 cable channels would face a change of bill ranging from a 13 percent decrease to a four percent increase, with a decrease in three out of four cases.

The point is that it is very hard to tell, conclusively, what might happen if providers shifted to a la carte viewing.

When multichannel video distributors say a bundled approach creates economics that favor smaller, niche networks to thrive, they are right, economists might say.

Deprived of carriage on a broad "enhanced basic" tier, perhaps 60 percent of networks might find themselves immediately imperiled, as going concerns, some would estimate.