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McCain bill takes aim at cable practices

Fri, 05/10/2013 - 1:02pm
Brian Santo

Senator John McCain has introduced a bill that aims to fix a grab-bag of problems in the TV industry. His bill proposes to bar programmers from offering channels only in bundles; it aims to make retransmission consent arguments easier to adjudicate; and restricts sports blackouts, among other measures.

The first question is how effective the language of the bill might be. The second is whether programmers and broadcasters, who stand to lose the most if the bill passes, will have the political might to kill the bill. McCain offered similar legislation in 2006, and that effort was defeated.  

The summary of the bill, which McCain dubbed “The Television Consumer Freedom Act of 2013,” says its purpose is to “allow multichannel video programming distributors to provide video programming to subscribers on an a la carte basis, and for other purposes”

The term “a la carte” popularly refers to the ability of consumers to buy individual channels, but that is not what this bill is about. Rather, it addresses the process of how programmers offer their channels to multichannel video program distributors (MVPDs). The bill says programmers must offer channels on a channel-by-channel (a la carte) basis.

Smaller MVPDs have long complained that programmers with popular channels force them into taking bundles of channels, starting with the ones they (and viewers want), but then also including several others they might not. For example, Disney is notorious among MVPDs for forcing those who want ESPN to also take multiple associated and less-popular ESPN-branded channels.

The bill fails to address the problem that MVPDs are complaining about, however. Programmers already do offer popular channels on an a la carte basis; the problem is that the programmers are accused of using pricing strategies to force MVPDs to take bundles. Programmers reportedly charge exorbitant prices for individual popular channels while offering steep discounts for bundles of channels.

The price for the bundle might be lower than the price for the single popular channel alone, but then the problem is that operators might not have enough spectrum to allocate to the other channels in the programmer bundle – not without bumping other popular channels. This is an especially acute problem for smaller operators.

Next, the bill aims to minimize programming blackouts, which are occurring with greater frequency as retransmission consent arguments grow increasingly bitter. When retrans negotiations break down, it is often difficult to determine which party involved was being intransigent or unreasonable because the negotiations are frequently secret, conducted under non-disclosure agreements.

McCain’s bill says that when retrans consent negotiations break down, the particulars of the negotiation must be disclosed to the FCC, an adjudicator of such disagreements.

This might make it easier to induce the negotiating parties to solve their differences, but it’s not clear how it would forestall blackouts. In fact, the bill doesn’t even mention blackouts in the context of retransmission consent disagreements; it’s all context, and few specifics.  

The bill does mention blackouts, but only sports blackouts, a separate issue, and one largely confined to NFL games. It would “prohibit the application of sports blackout regulations to the broadcast of a sporting event taking place in a venue the construction of which was financed, in whole or in part, by the Federal Government or a State or local government.”

That would apply to most modern stadiums occupied by most pro sports teams, which are built almost exclusively using public funds from one source or another (Federal, state, local).

Finally, on the subject of spectrum management, the bill states that if a broadcast TV station is transmitting its signal only to MVPDs and not over the air, it forfeits its spectrum license.

The American Cable Association, which represents smaller MVPDs, issued a carefully modulated statement that gives McCain A-for-effort praise, but falls short of endorsing the bill.  

ACA president and CEO Matthew M. Polka was quoted saying, “Sen. McCain’s new bill highlights a point that many, including ACA, have been making for a long time, which is that programmers use their formidable market power to impose tying-and-bundling requirements on unwilling distributors.  The result is that consumers must subscribe to large pay-TV packages that are populated with dozens of unwanted channels.

“ACA does not believe that mandated retail a la carte for every channel offered is the answer, but we look forward to working with Sen. McCain in helping shape policies that deal with the influence of programmers in a manner that gives distributors the genuine ability to create consumer-friendly programming packages as a substitute for the all-or-nothing status quo that enriches programmers but frustrates millions of consumers.”

The American Television Alliance (ATVA), a coalition of consumer groups, cable, satellite, telephone companies, and independent programmers, approved of the bill. The organization said it “will benefit the many consumers around the country who are crying out for reform.”

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