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Federal Communications Commission Chairman Michael Powell is finding himself in the unusual position of advocating a regulatory scheme that discourages greater media consolidation. A study Powell released rejects calls for so-called a la carte cable channel pricing, saying it would result in consumers paying more for pay television than under the current system, where customers buy bundled programming. The FCC report is expected to blunt efforts in Congress to impose a la carte pricing. That constitutes a major victory for smaller cable networks, which have said they would have to sell out to their larger rivals if bundling was eliminated. The report acknowledged these fears, forecasting a loss of independent programmers if a la carte is implemented. “The loss of cost savings, combined with the loss in advertising revenue and the likely rise in license fees to compensate such losses, may cause many program networks to fail, thus adversely affecting diversity,” the FCC concluded. Smaller networks argue that they cannot afford to appeal directly to consumers, who would have to add their channels to their cable packages. The current system is preferable because they need only lobby the cable company to add them to their lineups. Independent networks vary from Crown Media Holdings Inc. of Greenwood Village, Colo., owner of the Hallmark channel, to the Christian Broadcasting Network Inc. of Virginia Beach, Va., best known for carrying Rev. Pat Robertson’s “700 Club” broadcast. Consumer groups and Senate Commerce Committee Chairman John McCain, R-Ariz., criticized the FCC report as flawed. Rather than studying whether mandatory a la carte pricing would help consumers lower their cable bill, the agency should have studied the impact of a voluntary plan that would let viewers choose between a traditional cable package or buying channels on an individual or mini-bundled basis, consumer groups and McCain said. “It appears that the industry has been successful once again in distracting policymakers with a ‘parade of horribles’ that they allege would result from a mandatory a la carte offering,” McCain said in a statement late Friday. Jonathan Rintels, executive director of the Washington-based Center for Creative Voices, questioned the assumption that independent program networks would be hurt by a la carte pricing. Many so-called independent networks that have opposed a la carte have received huge grants and other forms of funding from major media conglomerates. Time Warner Inc. acquired a minority stake in women’s network Oxygen Media Inc. in 2001. TV One is a joint venture cable network by Comcast Corp. and Radio One Inc., a broadcaster serving African-Americans. “I don’t see how they speak for independent networks,” Rintels said. “They’ve sold their souls to get carried by major cable companies.” Lynn McRew, spokeswoman for TV One, dismissed Rintel’s complaints. She said the Silver Spring, Md.-based television network may have advantages over other smaller networks. But it would be more difficult for TV One and other minor networks to survive with a la carte pricing because they would need to divert money allocated for programming to marketing and promotion. Officials at Oxygen and Radio One did not return calls for comment. Rintels said a voluntary a la carte system that allowed consumers to choose between traditional cable packages and a la carte or theme-tiered options would permit new independent programmers to launch networks. Other independent networks include Outdoor Channel Holdings Inc., Landmark Communications and Jones Media Networks. An a la carte system could make these independent networks acquisition targets by a small group of big media companies that own the vast majority of cable channels. Buyers could include Viacom Inc., Walt Disney Co., General Electric Co., News Corp., Time Warner Inc., News Corp., Liberty Media Corp. and Comcast Corp. Copyright �2004 TDD, LLC. All rights reserved.

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