SMALL CABLE OPERATORS READY TO TAKE ON NETWORKS
Gearing up for new round of retransmission consent talks, to begin Oct. 1, small cable operators say they're ready to take on broadcast networks at FCC and in Congress. American Cable Assn. (ACA), in FCC filing that’s still in draft form, is asking Commission to initiate either inquiry or rulemaking investigating tactics major broadcast networks have used in securing retransmission consent from small cable operators in each of last 3 rounds of retransmission consent talks, in 1999, 1996 and 1993. ACA board also is drafting proposed legislation to address retransmission consent and other issues small operators believe are driving up monthly cable bills and giving consumers fewer viewing choices. ACA has been in touch with Sen. McCain (R-Ariz.) and others in House and Senate about those issues and believes legislation will be introduced this year, officials said.
ACA Pres. Matthew Polka said his focus was on leverage used by broadcasters in their negotiations to force cable operators to carry channels they don’t want. Every 3 years, broadcasters must decide whether they want to elect must- carry status on cable systems -- in which case there are no negotiations if broadcaster qualifies -- or retransmission consent, in which broadcaster negotiates for carriage, knowing that it has something valuable to offer that cable operators want. In this case, that’s local news, weather, sports, network-level news and programming. Deadline for broadcasters to make their decision is Oct. 1. Between Oct. 1 and Dec. 31, broadcasters and cable operators negotiate for 3-year agreement that would begin Jan. 1, 2003. If agreement isn’t reached, cable operator must drop channel or channels involved.
ACA accuses networks of using desirability of local stations to win cable carriage of less-desirable programming. Polka points to Disney as example, saying company that owns ABC forces cable operators to carry SoapNet. “SoapNet is on a lot of [cable systems] but that doesn’t mean it has a lot of viewership,” Polka said. “Because of these retransmission consent abuses, customers are forced to pay for services that they probably don’t watch and wouldn’t pay for if they were sold separately.” ACA said companies also use their leverage to tell cable operators where to put channels or their lineup, often forcing channels onto basic or extended basic tier, when cable operators would rather put services on digital tier. Polka said Disney, News Corp., GE and Viacom all have used similar tactics since 1993, when retransmission negotiations started following 1992 Cable Act.
Disney Exec. Vp-Govt. Relations Preston Padden said some cable operators have chosen to pay cash license fee and not carry bundles of other programming, and company is willing to make that trade-off in every case. “We always offer cable operators the option of paying a cash license fee for ABC retransmission,” Padden said: “The bundles of other program services like SoapNet are offered for the convenience of cable operators who prefer to not pay cash for ABC retransmission.” ACA’s Polka said companies usually ask for what he called “unrealistic” and “exorbitant” fees for option not to carry bundles. Viacom spokesman declined to comment. On behalf of GE, which owns NBC, Bob Okun, vp, NBC Washington, also declined to comment. News Corp. spokeswoman said company wanted to see ACA’s FCC filing before commenting.
ACA also accuses some independent broadcast groups of trying to get around FCC on question of dual must-carry, telling cable operators that if they want to carry signal in analog, they also must do so in digital. That’s happening even though FCC has yet to conclude whether dual must-carry is constitutionally sustainable and what “rights” broadcasters have in yet-to-be-realized digital world, ACA said.
NCTA, which has members on both sides of issue, said only that “retransmission, as imperfect as it is, is the law of the land” and declined to comment further. NAB also declined to comment. However, one broadcast industry source said broadcasters must do something to be compensated for their content, and since cable operators have refused to pay broadcasters, networks decided to get into cable business.
ACA wants FCC to take action where it can under existing rules or recommend changes to Congress. Polka said he believed FCC already did have some latitude within its already-established “good-faith” negotiating rules under retransmission consent. “I think there is quite a bit of room that the FCC has to say what types of tactics and negotiations are presumptively in good faith and what tactics aren’t,” Polka said.
ACA board also is drafting proposed legislation addressing issues related to retransmission consent. Legislation would: (1) Increase “transparency” of programming rates by allowing cable operators to disclose to consumers and local lawmakers what programmers were charging, something they're not allowed to do now under most contracts. (2) Give cable operators option of putting some services on tiers. (3) Apply federal antitrust laws to programing services, thereby prohibiting broadcaster programmers from bundling content services in way that limits cable operator or consumer choice. ACA also is in favor of giving consumers a la carte choice of programming services to control their cable costs. Polka said ACA had been talking with McCain, who has asked General Accounting Office to investigate cable programming prices, and other key lawmakers in Senate and House on possibly sponsoring ACA’s legislation. He declined to identify other lawmakers.