FCC Adds to Cable Burden

Updated from 2 p.m. EST

The cable industry just got its latest brushback pitch.

FCC Chairman Kevin Martin said Tuesday he's in favor of so-called a la carte pricing of cable programming. Martin said enabling consumers to choose individual channels instead of bundles might be cost-effective for consumers. The agency also concluded that themed tiers, such as family programming, could be a boon to subscribers.

The agency doesn't have lawmaking power, but its comments could shift the debate over the industry's practices. Under previous FCC chief Michael Powell, the FCC held that such regulation could hurt cable and telecom operators and programming networks, as well as subscribers.

The reversal could make it harder for big players like Cablevision (CVC Quote), Comcast (CMCSA Quote) and Time Warner (TWX Quote) to appease investors already impatient with their slow growth. A la carte pricing could also punish profit at big programmers like Disney (DIS Quote) and Viacom (VIA Quote), some say.

Even so, industry observers cautioned that the battle has a long way to go.

"Basically, we think full blown a la carte could be catastrophic for cable distributors and programmers, but we don't really think there's a political constituency that would let that happen," says Chris Marangi of Gabelli & Co., which owns many media stocks. "I think that basically this is an opening gambit by Chairman Martin to get a family tier which would be less damaging to the cable business model."

He adds that the FCC move "does put a chill on cable and cable programming valuations because it adds some uncertainty looking forward. Its another knock on the industry at a time when it doesn't need one."