Satellite, Cable and Broadcasters Set Table for STELA Reauthorization Debate

A majority memo that circulated ahead of the hearing said recent retrans disputes appear to be the result of “structural market changes” since the 1992 Cable Act. Increased competition among video distributors has “emboldened broadcasters that air popular programs to demand more favorable terms for the right to carry that programming,” the memo said. “Ironically, increased competition in the distribution market may be resulting in higher programming costs that MVPDs pass on to their subscribers.”

Dodge will say “outdated laws and regulations need to be updated to reflect changes in the market and changes in how consumers view their content,” according to his prepared remarks. Dodge will tell lawmakers to use the upcoming expiration of STELA as an opportunity to “safeguard viewer choice from the increasingly frequent and highly unfortunate phenomenon of retrans consent disputes.” Consumers are the “losers” in broadcast retrans consent disagreements and lawmakers “can restore balance to the negotiating table by allowing cable and satellite carriers to substitute a network signal from a non-local market during an impasse in retransmission consent negotiations with a local market affiliate of that same network,” his testimony said.

Broadcasters are “accusing millions of subscribers of being copyright infringers” for wanting to use Dish’s ad-skipping technology, Dodge will say. CBS, ABC, Fox and NBC have sued Dish in federal court seeking injunctions that would bar the AutoHop feature based on their claims that it amounts to contributory copyright infringement (CD Dec 5 p19). Broadcasters are “fighting to preserve the status quo,” said Dodge’s testimony, “rather than embracing consumers’ evolving expectations and tastes."

Dodge will stump for the company’s $25.5 billion bid for Sprint Nextel, which he said would offer a “game-changing” nationwide fixed and mobile service for voice, video and data. The deal is better for consumers, Sprint shareholders and U.S. national security than the competing offer from Japan’s No. 3 carrier, SoftBank, his testimony said. Last year, Sprint accepted an offer from SoftBank, a $20.1 billion bid for 70 percent ownership (CD Oct 16 p1).

The video market regulation system “is not broken,” NAB President Gordon Smith will tell lawmakers. “Changing these laws is not in the public’s best interest and will do nothing more than pick winners and losers in what is today a very competitive marketplace.” Smith will emphasize how broadcasters provide “a public good that cannot be replaced” in keeping local communities informed of weather and emergency alerts, among other public affairs. “I would ask that you, as policymakers, ensure that changes to laws and regulations do not harm this unique and crucial local television broadcasting system,” he will say. Smith said broadcasters “stand ready to roll up our sleeves and help in any way possible to conclude the [FCC spectrum] auction in a successful and timely fashion to the benefit of consumers and the public’s safety.”

"If market failure is characterized by a lack of new entry, there is clearly no failure in the video marketplace,” NCTA President Michael Powell will say. He will emphasize the increase in quantity, quality, and choices that cable companies offer to consumers in addition to the proliferation of companies that stream video content online. Other than some “surgical changes” to the market’s regulatory framework, “a broad rewrite is not necessary and could even be counterproductive,” he will say. Powell’s prepared testimony defends cable bundling and makes no mention of decreasing the cost of cable services to consumers.

"It is time for Congress and the FCC to revamp the rules of the video industry to promote the public interest,” Begmayer’s prepared testimony said. He will advocate for the repeal of the sports blackout rules and a legislative update of the “dysfunctional retransmission consent system.” Video regulations should “better serve the public interest, allowing all creators to be fairly compensated while bringing down bills and increasing the choices available to viewers,” said his prepared testimony. Lawmakers should also extend video regulations and protections to online video providers as well as restrict “discriminatory data caps,” his testimony said.

Sen. John McCain, R-Ariz., who recently introduced the Television Consumer Freedom Act (S-912), plans to deliver testimony, his spokesman said. That’s even though he’s no longer a member of the Senate Commerce Committee. On Friday, McCain said the “current regulatory structure is rigged in favor of corporate interests over consumers, resulting in Americans paying ever-higher cable bills for channels they do not want to watch.” His bill aims to encourage video programmers and distributors to offer a la carte video to consumers, deter broadcasters from downgrading their over-the-air services and amend the sports blackout rules (CD May 10 p2).

Guggenheim Securities analyst Paul Gallant said it’s “unlikely that Congress would pass such an aggressive move toward a la carte. But merely raising the issue of a la carte could encourage discussion of other policies aimed at limiting content company power.” It’s “far from clear at this point” whether McCain’s pro-Aereo provision in the Television Consumer Freedom Act will gain traction, said Gallant in an email to investors Monday. Under the bill, broadcasters that decide to “downgrade” or stop providing on-air programming would forfeit their spectrum licenses, which would subsequently be auctioned for mobile broadband use. Executives at several networks have publicly threatened to take their programming off the air to thwart the business model of online-TV startup Aereo, which streams broadcast-TV signals to consumers via the Web. Dodge will endorse the so-called Aereo provision of McCain’s bill.

Last year, members of the Senate Commerce Committee generally agreed that consumers should have more choice and control of the video content they receive but disagreed about how to achieve that (CD July 25 p1). Chairman Jay Rockefeller, D-W.Va., said the video market “isn’t working” when consumers are “paying too much” to “have very little choice” in their viewing options. Absent from this year’s examination of the issue are former committee members and ex-Sens. Jim DeMint, R-S.C., and John Kerry, D-Mass., who previously sparred over whether to tweak or deregulate the rules that govern the video market.