New Organization Works for Reform of Broadcast Retransmission Rules

New Organization Works for Reform of Broadcast Retransmission Rules
July 16, 2010

Bruce Edward Walker

Bruce Edward Walker was managing editor of InfoTech & Telecom News from 2010 to 2012.... (read full bio)

A 31-member coalition organized around the issue of broadcast retransmission fees has been formed to press for resolution of conflicts between broadcasters and cable and satellite companies that have begun causing TV viewers to miss desired programs and channels. Consisting of consumer groups, independent programmers, satellite and cable companies, the American Television Alliance (ATVA) aims to ensure negotiations between broadcasters and local television providers (cable operators and satellite telecommunication companies) don’t result in blackouts of programs as happened in New York during the telecast of the Academy Awards this past March.

“Retransmission rules have not been reformed since they were adopted 18 years ago,” said ATVA spokesman Dick Keil. “We want to make sure our customers are spared the disruptions of their service and increased fees for the programs they enjoy viewing.”

Oscars, Other Shows Missed
The Academy Awards blackout was a high-profile example of customers who pay for cable or satellite TV programming packages being subsequently denied some programs and channels because of the inability of retransmitters and rights owners to negotiate agreement on fees.

In the New York City case, 3 million people missed the opportunity to view the beginning of the Oscars because of an impasse between ABC affiliate Channel 7 and Cablevision over Channel 7’s imposition of an additional fee on Cablevision to retransmit the annual award program.

Another example of the smackdown between broadcasters and cable providers occurred when cable network Fox TV tried to charge Time Warner Cable more than $1 per subscriber for the retransmission rights to such top-rated series as House, Family Guy, American Idol, and Glee. TWC eventually cut a deal so its customers could view the programs.

FCC Has Favored Broadcasters
When not absorbed by cable companies, costs for these transactions often are transferred to the end users, and cable subscribers may or may not be aware of the reasons behind the special fees appearing on their monthly bills. They also are more than likely unaware of the current regulatory landscape that allows broadcasters to hold programming hostage until carriers concede to financial demands.

The dispute derives from Federal Communications Commission (FCC) regulations originating in the 1960s, deliberately favoring broadcasters over cable providers. The rationale behind these regulations was to protect local broadcasters “in the public interest,” as the FCC assumes local broadcast stations are better equipped to relay information about emergencies such as extreme weather events.

In 1992, Congress passed the Cable Act to curtail what its proponents claimed was the cable industry’s unfair competitive advantage over local broadcast outlets. Because most cable companies operated unchallenged in local markets at the time, Congress began to regulate cable operators and the manner in which they retransmitted broadcast programming. Eventually, broadcasters were granted the option of either declaring themselves “must carry,” which entails providing their content for free, or charging cable operators to “retransmit” their content (copyright fees were paid separately).

Power in Broadcasters’ Hands
Since 1992, however, delivery of broadcast content has evolved beyond cable. Multichannel video programming delivery systems (MVPDs) have expanded to include not only cable but also direct broadcast satellite services and newer technologies as Verizon’s FiOS and AT&T’s U-Verse systems, as well as cable “overbuilders” such that in many markets consumers have two or three or even four choices for pay television.

The so-called retransmission consent rules, however, have remained unchanged since 1992, enabling broadcasters to negotiate more favorable deals for content. Because MVPDs generate their income from subscription fees, broadcasters wield a distinct advantage when it comes to negotiating fees for retransmission consent, especially when that signal is as potentially lucrative as the Super Bowl or the highly anticipated final episode of a hit television series. The evolution of wireless, fiber optics, the Internet, and satellite options for local content providers enables them to withhold access to their content from cable companies and negotiate with other outlets.

According to Steve Effros, president of Effros Communications, a Virginia-based communications consulting firm, the 1992 Cable Act is responsible for the current uneasy relationship between broadcasters and carriers. “The retransmission consent rules warped over a 50- to 60-year period, creating a perverse universe where the laws of economic incentives have been turned around,” he said.

“I have nothing against broadcasters,” Effros stated, “But they shouldn’t have free license over the broadcast spectrum. The entire structure makes no sense—the largest piece of oceanfront property is used by broadcasters who get it for free, and they can turn it off as well.”

Small Cable Networks in Danger
Pat Baldwin, senior vice president of Retirement Living TV—also a member of ATVA—says the debate over retransmission rules isn’t “just about one big corporate giant against another big corporate giant.” Retirement Living TV, based in Maryland, is available to approximately 15 million cable subscribers in the United States and is carried by Comcast and Verizon cable providers.

“I’m concerned that the smaller providers will be hurt,” he said. “[CBS Chief Executive Officer] Les Moonves has said that cable providers can afford to pay whatever fees large broadcasters charge if they simply drop smaller content providers like us. It’s a pretty shocking assertion to make.”

 ‘Consumers Get Squeezed’
“Now it’s the broadcasters who can determine what’s in the public interest,” said Effros. “They can determine that ‘this speech’ is more important than ‘that speech,’ or they can get viewers hooked on a program, which they can turn off unless the broadcaster gets paid more by the carrier.”

“It’s the consumers who get squeezed,” said Effros. “And when they get angry because they can’t see a program they like or they find an extra charge on their bill, it’s the carrier who gets hung from a light pole.”

Bruce Edward Walker

Bruce Edward Walker was managing editor of InfoTech & Telecom News from 2010 to 2012.... (read full bio)