More FCC Involvement in Carriage Seen if Petition Succeeds
Both broadcasters and subscription-video providers would see more FCC oversight of carriage deals if a petition from a variety of pay-TV companies (CD March 10 p1) is successful, executives from both industries said. Pay-TV executives who believe the retransmission consent system is broken and needs legislative or regulatory intervention see that as a good thing. Some broadcast officials are leery of more FCC involvement in what they say are privately negotiated deals and believe it could backfire on multichannel video programming distributors.
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"It’s somewhat dangerous for the MVPDs to be talking about having the government get involved and kind of undo the current retrans regime,” said CEO Vince Sadusky of LIN TV, which owns or runs 27 stations. “It simply opens up the door for the potential to really re-regulate.” The FCC doesn’t desire to “step into this private negotiation between companies, especially when [some of] the companies we're talking about are national in scale and their profitability is very high.” Analysts said they think the commission may be receptive to the petition. A spokeswoman for the Media Bureau declined to comment on the petition.
"If the broadcasters truly feel this is a free market, they should invite that scrutiny too,” said President Matt Polka of the American Cable Association, among the petition’s 14 signers. “Does it put broadcasters on the defensive? Of course, because they have to fight current rules and regulations that give them the monopoly power,” he continued. “We have felt for a long time that we've kind of been the canary in the coal mine” on retransmission consent but now “the broadcasters are basically painted in the corner” and are likely to find little support from outside their industry.
"To see billion dollar pay TV companies asking for government intervention to protect their exorbitant profits is just plain wrong,” an NAB spokesman said. “The unintended consequences of pay TV providers attacking the free-market-based retransmission consent model could be the demise of local programming” since such fees help offset costs for news and other programming, he said. NAB TV Board Chairman Paul Karpowicz said retransmission consent rules guarantee no compensation for broadcasters. The FCC has “thoroughly reviewed” the system and found it works as Congress intended, he wrote the heads and ranking members of the House and Senate Commerce committees Wednesday. “For one party to suggest regulatory or legislative change would begin to tip the scales in its favor,” wrote Karpowicz, also president of Meredith’s TV stations.
The petition “will prove extremely illuminating to policy makers regarding which programs are really providing the most value” because cable channels often get more money from MVPDs than TV stations, a broadcast official said. “They need to be careful what they wish for.” Although “cable operators are often on the defensive in Washington,” this may be an area where “they can more easily claim the `pro-consumer’ mandate,” wrote analyst Paul Gallant of the Washington Research Group. “We suspect there is at least some support within the FCC for pay TV companies.” Recent carriage disputes, including one Sunday between Disney’s ABC and Cablevision, may increase the regulator’s interest, Stifel Nicolaus analysts predicted.
Pay-TV executives said they'd welcome the attention. “Retransmission consent is an outdated and highly regulatory regime,” said a spokesman for NCTA, which didn’t sign the petition. “It confers unique government privileges and benefits on broadcasters that are no longer justified in today’s competitive marketplace. We strongly support retransmission consent reform and exploring ways that carriage disputes can be resolved fairly and expeditiously without disrupting consumers’ ability to watch broadcast programming.” Recent carriage impasses show “the current retransmission consent system is broken,” said a spokesman for Verizon, a signer. “The current rules allow broadcasters to engage in brinksmanship and threaten to withhold broadcast programming from consumers in order to gain better terms in their negotiations with video providers."
"It’s a fair and reasonable disagreement” pay-TV companies and broadcasters are having over carriage fees, “but the resolution seems to be Russian roulette or playing to the brink,” said Michael Willner, CEO of Insight Communications, a petition participant. “At times when you play it to the brink you fall off the cliff and that’s not good for consumers,” he said. Binding arbitration, sought in the petition to resolve disputes, isn’t “the best solution here, but its better than nothing when consumers are losing their television signals,” he said. “We have to have a conversation about how to make it work better."
"Clearly, if the FCC fixes this under existing authority, it’s going to mean more FCC involvement,” said Thomas Larsen, vice president of Mediacom. “Obviously, legislation by Congress could eliminate the need for a lot of FCC involvement.” DBS providers already face commission involvement in their business by dint of program access rules requiring channels affiliated with cable operators to provide them with programming, said Vice President Linda Kinney of Dish Network. “From our perspective it just removes the consumer from the controversy, and we obviously think that’s a good thing,” she said. “If the market is broken, that’s when you need a regulator to sort of supervise the process to make sure everyone can have access.”