With the Supreme Court deciding to let stand the legal status quo regarding must carry, the American Cable Association is back to pressing the Federal Communications Commission to revise retrans rules and regulations to “prevent broadcasters from charging discriminatory fees and creating joint negotiating entities in order to further maximize their economic leverage over small cable providers.”
The ACA was joined by a broad coalition of service providers that include many of the largest MSOs, both satellite TV companies and Verizon.
Broadcasters have extraordinary leverage to squeeze retrans fees out of smaller ops that are twice as high as the fees charged to larger MSOs, according to a recent study. Small ops have been forced to pass those fees on to their customers, raising prices.
The ACA noted that FCC Chairman Julius Genachowski recently agreed to conduct a review from a consumer-protection perspective, including whether agency rules are causing cable rates to rise in response to broadcasters' escalating demands for more cash from cable operators.
ACA President and CEO Matthew Polka said: “FCC intervention is essential to shield consumers from a broadcast industry bent on abusing its market power to gouge consumers served by small cable operators in hometown America. If the FCC's effort yields the kind of level playing field we hope to see, it will take pressure off retail cable rates while freeing up capital vitally needed to accelerate broadband deployment in rural communities in every state.”
At the ACA’s request, William Rogerson, professor of economics at Northwestern University and former FCC Chief Economist (1998-99), analyzed retrans fee data and determined that small cable and its customers end up paying far more for access to the affiliate and owned-and-operated signals of ABC, CBS, NBC and FOX stations, primarily because these broadcasters have significant bargaining power over ACA members.
The ACA also called on the FCC to crack down on local broadcasters that have joined forces to negotiate retransmission consent deals in an effort to put more pressure on small cable to overpay for their signals.
Although FCC rules generally ban the common owners of two Big Four network stations in the same market, many broadcasters have avoided scrutiny by fashioning alliances not normally reviewable by the FCC, such as local marketing and shared services agreements, the ACA charged.
Through these duopoly style arrangements, one entity is allowed to conduct retransmission consent negotiations on behalf of two "must-have" affiliates, resulting in small cable operators paying substantially more for retransmission consent than if the two affiliates had to negotiate separate deals.
The ACA cited evidence provided by cable operator Suddenlink Communications showing that these broadcaster negotiating alliances drive up the cost of retransmission consent by about 21 percent. The ACA has identified at least 93 sharing agreements or duopolies in 78 television markets, affecting more than 37 percent of the 210 DMAs, and with the heaviest concentration found in smaller markets served by ACA members.
On the FCC petition with ACA were Bright House Networks, Cablevision, Charter Communications, DirecTV, Dish Network, Insight Communications, Mediacom Communications, New America Foundation, Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), Public Knowledge, Suddenlink Communications, Time Warner Cable and Verizon.
The Supreme Court recently decided to let stand a decision by a lower court that affirmed that cable must carry local stations.
In that story, CED wrote: "Broadcasters are boosting their income by charging cable companies significantly higher fees for their content. With the current must-carry status quo now affirmed by the Supreme Court, retransmission negotiations are likely to become even more bitter, with broadcasters feeling more emboldened and cable operators – especially the smallest ones – denied the leverage of being able to drop broadcast stations should the fees they request become too exorbitant."
This is not accurate. FCC rules give broadcast stations a mutually exclusive choice between "must carry" and "retransmission consent." If they choose "must carry," they cannot demand payment for retransmission consent – U.S.C. 47 534 (b) (10). Cable operators are indeed free to drop broadcast stations whose fee demands become too exorbitant, according to Marvin A. Sirbu, professor of engineering and public policy, industrial administration, and electrical and computer engineering at Carnegie Mellon University.