Cable provider files lawsuit over channel bundling

Ever complained there is nothing to watch despite having hundreds of channels at your disposal? Or shuddered at the sight of your cable bill, knowing you only watch a handful of the channels that you are paying for each month?

Believe it or not, cable companies are becoming sympathetic to your plight, even if they are motivated by their own bottom line. Last month, service provider Cablevision filed a lawsuit in New York federal court against Viacom claiming it has illegally forced the company to carry and pay for a number of channels that its customers have no interest in watching.

More specifically, Cablevision is taking issue with the fact it must carry 14 of Viacom’s ancillary channels – including CMT, MTV Hits, VH1 Classic and Nick Jr. – in order to be able to offer popular channels, such as MTV and Nickelodeon. The abuse of power has resulted in an inability for Cablevision to deliver choice in its programming, including those from networks that compete with Viacom’s lower-ranked channels.

The lawsuit alleges Viacom threatened “massive financial penalties” if Cablevision did not comply with its demands, something that harms Cablevision’s customers and blocks competition. The actions, says Cablevision, are in violation of federal antitrust laws meant to protect consumers. It also alleges Viacom’s practice of “block booking” – forcing a provider to accept multiple channels as one unit – also violates the Donnelly Act in New York State.

“The manner in which Viacom sells its programming is illegal, anti-consumer, and wrong,” stated a Cablevision press release.

Viacom has blown off the lawsuit, calling it ill-advised and frivolous, and noting it recently negotiated a new agreement with Cablevision that included reduced rates. In a pot-meet-kettle moment, it has accused Cablevision of charging even higher rates for its own sports channel spin-off MSG. Viacom says Cablevision also participated in the same channel-bundling practices with its former entity AMC.

Despite Viacom’s counter attack, it doesn’t appear Cablevision is alone in its quest. Other companies, including DirecTV and Time Warner, have reportedly thrown their support behind its recent move. Although not associated with the recent lawsuit filing, Verizon – the sixth-largest cable-television provider in the U.S. – has also spoken publicly about the issue and continues to push for industry change.

And what would that mean for consumers? It’s still too early to say. But some analysts speculate it could result in lower bills and more freedom to customize your cable package. On the flip side, some fear it could make niche programming obsolete.

Though it’s not the first kick at the can – even the federal government failed in its push for change in the industry – some believe it could be the beginning of a new wave of market pressure that may eventually force media companies to unbundle their programming.

What we do know is that the steep cost of cable television and the introduction of new technology have seen subscribers flock to Internet-streamed offerings. It is estimated that up to 5 million families rely on online programming using services such as Netflix and more are joining the “cord cutting” trend by disconnecting their traditional service every day.