WASHINGTON, June 11, 2010 – If you missed Broadbandbreakfast.com’s panel session on retransmission consent fees, here’s your chance to catch up and re-examine the issues in a complex debate that’s been controversial since the enactment of the regime in the 1992 Cable Act.
Top-level industry executives from the worlds of cable and broadcasting sparred Tuesday morning over the question of whether the Federal Communications Commission needs to revise the rules governing how retransmission consent fees are negotiated between broadcasters and video distributors such as cable and satellite networks.
The fees are a form of compensation either in cash — or some other non-cash deal — that the video distributors (MVPDs) pay for broadcasters’ programming.
Early this March, a coalition of 14 entities that include the American Cable Association, Cablevision, Charter Communications, DIRECTV, Dish Network, Public Knowledge, The New America Foundation, Time Warner Cable, and Verizon petitioned the FCC to change the rules.
The group wants the FCC to allow distributors to carry the broadcasters’ signals on an interim basis during negotiations, even if contracts have expired. They also want the FCC to step in to arbitrate if the two sides cannot arrive at a new agreement, which must be re-negotiated every three years.
The petitioners argue that these steps would prevent the showdowns that can lead to service interruptions for consumers at critical television viewing moments, such as the Oscars and during sporting events.
To help you make the most of the video, below is a cheat-sheet and notes on what was discussed when during the panel so that you can fast forward to the most relevant part to you.
2.11 min — Quick summary of the legislative and factual background of the retransmission consent fee controversy between video distributors (cable and satellite companies) and the broadcasting industry.
8.15 min — Panelists start to introduce themselves and to state their company’s position in the debate.
8.30 min — Fernando Laguarda, vice president, external affairs and policy counselor, Time Warner Cable: “Time Warner Cable is here as one of the petitioners … who’s interested in fixing what we and a whole other coalition of video distributors and other public interest groups believe are the problems with the retransmission consent framework.
The problems are evidenced by broadcaster tactics that lead to brinkmanship, and threats of blackouts and actual blackouts in the service that is provided to consumers — who are otherwise entitled to receive broadcast programming in the marketplace.”
9.40 min — Chad E. Gutstein, executive vice president, Ovation: “We support a reform of the retransmission consent regime because we believe that having independent voices in the media landscape is a public interest, and without a reform of the retransmission consent regime that this interest is threatened.”
11.07 — Antoinette “Toni” Cook Bush, partner, communications and legislative matters, Skadden Arps, representing the four television networks in the proceeding. Worked on the Senate Commerce Committee between 1987 and 1992 when Congress debated and enacted the Cable Act: “At the time, Congress did expressly intend for broadcasters to have the right to charge for their signal, or to negotiate just like any other programmer for carriage on their system.”
13 min — Matt Polka, President & CEO, American Cable Association: “We as small companies pay more [for broadcaster programming] simply because we are smaller, and that impacts the ability of our companies to provide advanced services to our customers, services that they want — particularly today when we talk about broadband.”
16 min — John K. Hane, counsel, communications practice group, Pillsbury, [representing broadcasters:] ” … the MVPD business is rapidly maturing, it’s at 90 percent. “Retrans” is one of the many ways that MVPD providers are looking for growth to deliver to their investors. … “Retrans” is great because it attacks two avenues of growth. If successful, you can lower your prices, and you can also devalue the free option … which leads to migration of programming to the pay platform … ”
19.00 — Michael Calabrese, Vice President, New America Foundation Director of the Wireless Future Program: (joined the petition to revising the retransmission consent rules:) “We have this position for two primary reasons — first, the actual consumer harm, … the disruption of consumer programming, particularly programming that’s freighted with public interest value, such as news, weather, emergency alerts and public affairs programming, and the upward pressure on cable prices and the negative effect on broadband adoption, because so many families are taking broadband because of the marginal cost as part of the bundle with cable TV, and high switching costs even if there is general competition in the MVPD marketplace.
The second is that we see huge public subsidies in exchange for transmitting a primary video stream over the air [for free] … in exchange for transmitting [public interest programming for free to consumers.]
… imagine if the federal government had built out the networks for the cable and telco companies — we’d probably expect something in return. They also receive must-carry, which means that th threat of a black-out in programming is not reciprocal, and exclusive distribution rights in a local market, so if an MVPD cannot reach an agreement with one Fox affiliate, they can’t go and get a substitute signal from another market, because Congress has tilted the playing field.”
22 min — Panelists discuss the relationship between retransmission consent fees, video distributor package pricing, and the nature of competition in the video distributor and broadcast marketplace.
38 min — Ovation’s Gutstein argues that the current structure of the marketplace is squeezing out independent programmers, such as Ovation’s arts and culture programming. He says that Ovation has been refused carriage from MVPDs because of their retransmission agreements with broadcasters.
Gutstein: “Have the retransmission consent fees being paid been specifically talked about as a reason for reducing programming fees, or reducing carriage? Absoulutely. … this is not theoretical.”
41 min –Cook Bush: ” … when retransmission consent first kicked in, the united response of the cable industry was: ‘we’ll never pay broadcasters a nickle for their programming’ … there was this concerted effort, but all of a sudden, when competition developed, as the marketplace changed, and the proliferation of cable programming dramatically increased, once broadcasters put their foot down, and said: ‘You are going to pay us,’ all of a sudden, it’s [deemed] not fair.
Basically, the argument is that people who have popular programming shouldn’t be able to negotiate, that there should be some sort of harness put on them ...”
43 min — Polka: Nobody is arguing about the ability to negotiate. It’s about “negotiating in a legitimate market.”
47 min — Hane argues that MVPDs can simply drop network programming to try and distinguish themselves with lower pricing in the marketplace, and pick up more subscribers.
“CBS has great programming. It’s a great network. It’s a national brand, but it’s not essential. We can all live without it. It’s not an essential input to an MVPD.”
48 min — Laguarda: “I find it remarkable that the broadcast argument is that the product is either worthless, or comparable to garbage, or that it’s unnecessary, and it has no value. I think that the marketplace … “
Cook Bush: “That is a complete mis-characterization of what I said, and I resent that. I will not let you sit there and say that. I am talking about a competitive marketplace, and I am saying that cable operators should have to pay for broadcast programming, just like they pay for other programming.”
Laguarda: “You were analogizing to the marketplace when you were talking about it, and the marketplace you analogized to was to municipal trash — that was your example, not mine — the problem is that Congress already decided that this is not a marketplace, so it is too cute by half to look at the situation as it exists today and the consumer disruption and harm that is demonstrated today, and to say: Well now it’s a marketplace, and now, because there’s competition at the distributor level, that marketplace can be leveraged and taken advantage of by broadcasters in a way that harms consumers. …”
Cook Bush: “Well I would just go back and say that Congress did intend to create a marketplace, and they expressly gave broadcasters the right to control their signals, and to give them the right to seek payment or other compensation from cable operators. That was the express intent, and there is no equivocation about it.”
51 min — Calabrese on the public interest aspect of the 1992 Cable Act:
He says that broadcasters can’t ignore the fact that Congress gave FCC the power to regulate and enforce the public interest obligations of the broadcasters, who get to use their means of distribution — the spectrum — for free.
“Broadcasters just can’t walk away from the fact that they took a bargain, decades ago, that they’re being paid by the public to deliver a free stream of content with a whole variety o things that are so special.”
They’ve been arguing that the spectrum can’t be taken away from them because localism, local news, weather and emergency alerts, is so important.
The debate isn’t just about the marketplace, and how much cable operators and broadcasters can wring out of each other.
It’s about the interruption of service, which is “completely contrary to the bargain that the broadcasters have with the public.”
The FCC can put in place mandatory interim carriage as long as there is good faith bargaining, they can put in place binding arbitration, and/or some sort of administrative law panel that would resolve these disputes, so you can still have the negotiations, but you can do it without disruption of service, he says.
52 min — Discussion among participants about the nature of what kind of notice should be given to consumers about potential programming interruptions.
62 min — John Mansell, an independent consultant and audience member asks: “If this marketplace is truly competitive, why don’t you make it a little bit more competitive and allow the cable operator to import a distant network affiliate? After all, they can receive copyright royalties for it. Second question is: Why not let a cable operator become a network affiliate? Why do you need exclusivity?”
Hane: “The network non-duplication rules do not give a single broadcaster any advantage. I think probably the entire broadcast industry would be quite happy if the entire non-duplication rules were eliminated. …”
Polka: “Those rules are walls that prevent competition. That’s what happens.”
Cook Bush: But that doesn’t compel broadcasters to make their signals available to you. They could still say no.
70 min: More discussions about proposed solutions to the current situation. ###