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Wholesale Unbundling

What is Wholesale Unbundling? According to the Federal Communications Commission (FCC), the typical American consumer is only interested in watching 17 cable channels. Typically referred to as "highly desired" programming, these channels may include ESPN, USA, Discovery and MTV. However, for a cable operator to provide any one of those channels, the programmer or media conglomerate that owns the channel pressures the operator to carry and distribute several additional channels also under its ownership - and not just on any of the cable packages that the provider offers, but often on the most basic and widely distributed tiers. These operators are coerced into these deals without regard to consumer interest or its impact on household budgets.

Therefore, by "wholesale bundling" additional channels to a desired channel, the programmer can pressure cable operators to carry and pay for numerous unwanted channels. When statistics show that in order for cable operators to secure the rights to carry the most popular channels, programmers demand that at least 60 other channels are also carried, you can begin to understand why the most widely subscribed to programming packages are both bloated with channels and costly - charges that are ultimately passed on to customers in the form of higher cable bills.

While some programmers may "technically" provide cable operators with the option to purchase the desired channel on a standalone basis, or not tied to other programming distribution requirements, the per subscriber fee to offer a channel on a standalone basis is so exorbitantly high as compared to accepting a bundled package that the cable operator has no choice but to offer the bundle - or not to offer the channel at all. These standalone offers also include requirements that the channel be included in basic packages which means all subscribers would have to receive and pay for the channel, regardless of interest.

How Does Wholesale Bundling Harm Consumers? Customers served by independent operators - who lack the negotiating power to command more attractive deals - face reduced choice and disproportionately higher cable costs, as the cable operators have no choice but to pass on the cost for carrying bundled channel packages in order to continue offering high demand programming. In fact, the FCC estimates that programmers could be overcharging consumers more than $100 million per year.

In addition, for a cable operator to carry so many channels requires significant infrastructure and bandwidth investments. Frequently, an independent operator finds their ability to offer broadband services to the disconnected communities they serve impeded as resources and bandwidth is taken up by the bloated packages demanded by the programmers. Carrying so many channels of the largest programmers also reduces an operator's ability to provide channels owned by independent programmers which might be more desired by the community and cost less.

What is ACA Doing About Wholesale Bundling? Currently, the FCC is reviewing whether revisions to the wholesale cable programming and retransmission consent rules would provide consumers with more choice and value. ACA has presented the FCC with multiple filings to demonstrate how the current marketplace harms both independent cable operators as well as consumers. ACA and its members regularly brief FCC Commissions and their staff, as well as Members of Congress, to encourage prompt resolution in favor of independent cable operators. Our fight will continue until ACA members receive the relief they need from wholesale tying and bundling abuses at the hands of broadcasters and programmers.

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