ACA Members Remain Open to Disruptive Tech Like Aereo, Say Polka, Gessner

"Aereo comes in as a disruptive technology, and I love that term,” Polka said on the Communicators (http://cs.pn/16lGkGr). “Because it’s disrupting the current model, which I think is a great thing that technology is doing, and frankly provides consumers with a new way to potentially receive signals -- imagine that, over the air” and free, said Polka. Aereo and companies like it could be “potential partners” to cable operators, “potential companies that we could joint venture with, to provide our customers with more choices,” he said when asked if ACA members might work with the new company. Aereo had no comment.

Cable operators have a history of embracing disruptive technologies, an ACA member told us. President Robert Gessner said his MCTV, an Ohio operator with about 40,000 video customers and 36,000 broadband subscribers, already lets Google and Netflix use the cable ISP’s headend so those tech companies’ servers can reach its Internet customers more quickly with content. Companies that are part of ACA are broadband providers that want to help “give consumers that choice that they want,” Polka said on C-SPAN. He was referring to those companies’ embrace of using their own networks to deliver their own video as well as video from the likes of Amazon, Hulu and Netflix. It’s what consumers want, with “technology so far beyond today where we are from a policy perspective” when it comes to retrans, the rules and statute of which ACA wants to change, said Polka. NAB had no comment.

Using VOD to deliver on-demand shows to cable subscribers is “very expensive,” with “lots of headend equipment, new boxes, etc.,” said Polka, comparing it to broadband products. “Choice is driving more of the over-the-top viewing today, but cost certainly has an impact,” when the price of bundled video programming packages is rising, he said. ACA members, which combined have about 7.5 million video customers, see broadband as “the service,” which holds true “when you look at the cable industry in general,” said Polka. “Our members’ businesses, and their future really, is broadband,” he said. “More broadband is really the key."

Cord cutting is a reality for some ACA members that are losing video customers, though that business remains strong, Polka said. The trend is “underscoring the need for our members to continue to provide more robust” fast Web service as customers demand, with that consumer demand and speed and capacity doubling about every two years, he said. “There’s been some loss, for sure, without question, as we've seen across the country,” Polka said of cord cutting. “That’s sort of the bad news,” with the good news that ACA members sell broadband, he said.

"We are seeing some falloff on video,” and “outrageously expensive” programming costs with expensive sports content, said Polka. “You now have three very large competitors for the most expensive programming out there,” Polka said of ESPN, Fox and NBCUniversal networks. “That’s all coming to roost, as these companies compete for the rights to carry that programming.” Congress is taking notice of the increasing sports-programming prices, said Polka. “Consumers are starting to move more toward online viewing, because they're saying they don’t have much choice” as a pay-TV consumer, he said. “It’s a huge issue, one that’s not resolved -- it’s only getting worse."

Gessner calls video subscribers TV customers, because video encompasses a wide range of players and not just on TV sets, he told us. What he called cable-modem only customers “is certainly a trend,” and competition from AT&T, DirecTV and Dish Network and potentially cord cutting are playing a role for MCTV, he said. “Everybody except the top few in the industry are looking at a continuation” of major increases in retrans contracts, he said of cable operators. “As long as the Internet continues to remain affordable, people are going to make a choice” and may pay for broadband and not for video as a separate facilities-based service, said Gessner.

Cable’s history of being disruptive dates to its earlier days of using distant signals and goes to more recent years when the industry disrupted traditional media by bringing broadband service to households, Gessner said. “I certainly am willing to work with any of the technology companies that are out there.” Also the vice chairman of ACA, Gessner said he spoke only for himself. The trend in video subscriptions is “slowly over time eroding,” and some of that is going “to the Internet, no question,” said Gessner.

It’s hard to see Aereo signing deals with cable operators of any size until the litigation against it is resolved, said a pay-TV analyst. The service now “seems to be a popular negotiating point” in programming talks, said SNL Kagan’s Ian Olgeirson. “We're going to have to see what the courts say” before any deal likely would come to fruition, he said. “We're a ways out from Aereo becoming a tool that the operators turn to to combat retrans or offer a sort of paired-down video product, bundled with a high-speed data” service, he said. “There’s just a lot of uncertainty there, is it going to make it or not through the legal challenges."

Smaller operators don’t seem more affected by any cord cutting than majors, it’s just that they are probably experiencing larger total programming-cost increases than the top cable providers, said Olgeirson. Major companies may see 2013 percentage increases in the high-single or low-double digits, he said. Meanwhile, “the smaller operators are certainly up against it when it comes to programming costs,” he said. With more “leading edge” technological innovation, big operators may have a slightly easier time combatting over-the-top video substitution for pay TV, said Olgeirson: “It’s a subtle but important issue for all of the operators” and doesn’t “necessarily make the smaller operators more vulnerable to it than the larger operators.”