ESPN and ABC Sports President George Bodenheimer Appeared before Senate Commerce Committee; Declares a La Carte Would Cost Consumers More for Less.

Business Editors

NEW YORK--(BUSINESS WIRE)--March 25, 2004

ESPN and ABC Sports President George Bodenheimer spoke today before the Senate Commerce Committee, declaring that a la carte or tiering is not pro consumer and would cost consumers more for less.

Bodenheimer said, "We agree with the General Accounting Office that a la carte or tiered distribution models will not benefit consumers. They would pay more, get less and the price for the expanded basic service would not likely come down. The loss of ad sales revenue would be substantial, and the resulting loss would be borne by cable subscribers. Consumers simply should not be forced to bear additional costs for less programming."

"In independent surveys, both cable operators and viewers selected ESPN number one in perceived value. Removing ESPN off the expanded basic cable package would be a travesty for consumers. Cable customers and the 85% of Americans who consider themselves sports fans would rightly be outraged. They would lose access to ESPN's tremendously popular lineup of professional and college sports coverage or would be forced to pay significantly more for an extra fee tier of service and set top boxes they now don't need or want."

"Our affiliates negotiated and freely signed agreements through arm's length negotiations reaping the benefits of ESPN's tremendous value."

"Last and perhaps most important, government regulation of cable is not necessary or appropriate."

Bodenheimer's full testimony is attached.

ESPN televises some of basic cable's most highly rated programming. ESPN carried 14 of the top 15 most-viewed programs on ad-supported cable last year. For 17 years in a row, the NFL has ranked as the highest-rated series on ad-supported cable. In 2002 and 2003 ESPN has made significant programming additions including the NBA, Wimbledon, the French Open, the Women's NCAA Basketball Tournament and more.

                    TESTIMONY OF GEORGE BODENHEIMER
                  PRESIDENT ESPN, INC. AND ABC SPORTS

               BEFORE THE SENATE COMMITTEE ON COMMERCE,
                      SCIENCE AND TRANSPORTATION

                       THURSDAY, MARCH 25, 2004

Thank you Mr. Chairman and members of the Committee. I appreciate the opportunity to speak with you this morning. I am President of ESPN and ABC Sports.

ESPN is the distributor of two of the nation's largest all sports programming networks, ESPN and ESPN2 as well as ESPNEWS, a 24-hour sports news channel, and ESPN Classic. We are also driving the digital transition with our high definition service, ESPN HD, and we are expanding our reach with the recently launched ESPN Deportes, our 24-hour Spanish-language network.

85% of Americans say they are sports fans, and expanded basic cable in particular offers them a fantastic array of sports viewing options. Sports are clearly one of the most important reasons why people subscribe to cable. Therefore, I would like to be very clear on one very important issue: it would be a consumer disaster for Congress to force ESPN and other channels out of the expanded basic lineup. Doing so would not address concerns over the retail price of cable or indecency. Instead, consumers will be angry and highly dissatisfied if their favorite sport or college team or conference is taken out of expanded basic and available only as a premium service for which they must pay more. As to indecency, neither a la carte nor the "family tier" concept would be an effective tool. Existing v-chip and related blocking technology offer better, less intrusive alternatives provided a reasonable and uniform indecency standard is applicable to all channels on the basic and expanded basic tier.

GAO Report

We were pleased to have cooperated with GAO in its report preparation and we concur with its primary conclusions. First, competition, not regulation, is the most effective way to provide consumers with the best products, the broadest choices and the best prices. Second, programming costs are not the primary driver of cable prices. It is simply wrong to blame ESPN for the retail price decisions of cable operators, and ESPN's new distribution deals with moderating rate increases respond to concerns Congress or this committee may have had about ESPN's impact going forward.

We also agree with GAO that a la carte distribution schemes - whether for all services or just directed at a particular genre - will only produce higher prices for all cable customers, less choice and the extinction of many channels that serve specific but important audiences. A la carte would force consumers to pay more for their programming and to rent or buy set-top boxes they don't need or want. Every television would need such a box to activate a la carte and at $3 to $4 rental per box per month, consumers are looking at much higher costs, for fewer channels. Today, as you know, less than half of all televisions in America have a set-top box. A la carte would force all channels to expend millions of dollars in marketing and cable providers to spend huge sums on transaction costs to account for the churn brought about by people adding and dropping channels. These costs would most likely be borne by customers, again in the form of higher, not lower, rates. Make no mistake about it, whether you call it a "family tier" or a la carte, the consumer would be hit with higher costs and less choice.

Cable and Satellite Value and Choice

Cable TV is a tremendous entertainment value, and for a growing and significant number of Americans, satellite is offering a similarly compelling choice for multi-channel video. Indeed, consumers today have a wide array of purchase options, from broadcast basic cable at about $14 a month, to satellite packages starting at $25 a month, to the latest wireless video service that offers popular cable networks and high-definition broadcast signals for $20 a month. It's clear that choice and competition have taken hold.

Government regulation causing the breakup of expanded basic would not serve any positive purpose. Consumers will not be happy - or grateful - if ESPN and other cable channels are ripped out of basic service so that cable subscribers are charged extra fees to see the programming they enjoy today as part of their basic cable subscription.

Thank you. I look forward to responding to your questions.