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Grayson chucks retrans problem in FCC’s lap

Fri, 10/31/2008 - 8:25pm
CED Staff

Retransmission Consent: Davis makes sure subscribers know who’s raising their rates.

In response to the retransmission consent issue that has been weighing on small cable operators this year, one small op has taken matters into its own hands.

Chuck Davis – owner and operator of TV Cable of Grayson County in Texas – has sent his subscribers information about the retrans issue and how it could affect their bills, a letter that subs can send to the FCC in support of abolishing the fees, and a postcard that subs can send to their local Congressional leader to ask for their support.

Retransmission fees are going to “go right on straight through to the customer,” Davis said. “It won’t cost me a nickel. If I have to carry, my customers will pay for it.”

And Davis, 65, said that his average customer is older than he is. “They can’t afford for their cable bill to go up,” he said. “I’ve been real careful about how to raise bills with them. I don’t want them to be put off.”

The American Cable Association (ACA), which helped TV Cable of Grayson County create the materials it sent to subscribers, is “completely backing this,” Davis said. “They’ve been just wonderful.”

Davis, also with the ACA’s help, has sent out the same materials that it sent to its subs to other small operators across the nation; several, including Sunflower Broadband and Allegiance Communications, have taken similar action regarding informing their customers.

Two weeks after sending out the materials, Davis said that about 18 percent of his subscribers had returned signed letters to the FCC, which the operator has FedEx’ed over to the Commission. And about the same percentage have sent signed postcards to Congressman Ralph Hall (R-Texas), who Davis said has been “more than helpful.”

Davis estimates that retransmission fees could cause subscribers’ bills to increase by $3 to $5. Considering that his customers currently pay between $38.95-$42.95 for cable service, this would be about a 7-13 percent increase.

Retransmission Consent

“[Davis] is a perfect example of how government-instituted retransmission consent rules are significantly harming smaller cable operators, forcing up their rates and the rates of consumers, which affects [small cable operators’] ability to provide advanced services because they’ve got to put money into paying for what is otherwise free TV,” said Matthew Polka, president and CEO of the ACA. “And it is an example of the kind of abusive behavior and tactics that our members typically witness from broadcasters that are making take-it-or-leave-it offers . . . and are really sticking it to smaller operators, so we whole-heartedly support [Davis] and what he’s doing, and want to work through Congress and the FCC to reform retransmission consent rules because frankly, giving broadcasters a monopoly in their marketplace to dictate and demand whatever price they want isn’t something that’s consumer friendly or beneficial for providing advanced services.”

“I’m not the most expert person about retransmission,” Davis said on the issue. “I just don’t like it.”

By Oct. 1, broadcasters were required to make an election of must carry or retransmission consent with operators, since 2008 marks the end of another three-year contract between the two camps. The next cycle extends from Jan. 1, 2009, to Dec. 31, 2011, and currently negotiations are happening regarding the next three-year deals.

“Since our members are smaller, broadcasters put them off until the end, despite demands to negotiate with small operators,” Polka said. “Then they say, ‘Here’s the deal, take it or leave it.’” Some broadcasters have already presented demands to operators, he said, and members have filed good faith complaints with the FCC.

The problem for small operators is that they have less leverage than large ops, said Steve Effros, an analyst and consultant in the cable industry. “It’s purely leverage.”

If a large operator threatens to pull a broadcaster from its system, the broadcaster has reason to worry. But if a small operator threatens the same thing, the small operator then has to worry, because ops cannot go to another market and negotiate a deal with the broadcaster’s affiliate station. “There is a totally unequal situation with regard to leverage in negotiating contracts,” Effros said.

According to FCC rules and procedures, there is not a date that the Commission has to respond by regarding retrans, Polka said. But the ACA and small ops are pushing for a decision as soon as possible.

“If retransmission continues to go like it has for [Davis] and others, guys like [Davis] won’t exist, and rural areas won’t have triple play provided by local cable operators,” Polka said. “[Rural areas] may have satellite, but not a competitive phone service and broadband high-speed Internet service, and that would be a terrible loss for rural America if that happens. [The FCC] should fix this retransmission problem before it’s too late for the Chuck Davis’ of the world.”

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