The former FCC chairman and current CEO of NCTA, Michael Powell, says the regulation requiring cable subscribers to buy a basic broadcast tier needs to go.
Powell Urges Elimination Of ‘Must Buy’
National Cable & Telecommunications Association President-CEO Michael Powell told federal lawmakers today that an FCC regulation requiring all cable subscribers to buy the broadcast basic tier should be axed.
“It should be an extraordinary circumstance in which the government tells the consumer you have to buy a television package as a prerequisite of buying more of what you want, which is essentially what the rule does,” said Powell, a former FCC chairman, during a hearing before the House Communications and Technology Subcommittee.
Powell also told lawmakers that the so-called must-buy regulation is unfair because it applies only to cable, not cable’s competitors. “The other grounds on which I think it [the must-buy regulation] is fatally flawed is only cable subscribers have that obligation,” he said. “Dish and DirecTV satellite subscribers do not have that obligation, and they’re the second and third largest MVPDs [multichannel video programming distributors] in the United States.”
Powell’s comments came in response to a question from Rep. Anna Eshoo (D-Calif.) who introduced retransmission consent reform legislation late last year that would, among other things, clear the way for consumers to buy cable TV channels without first having to subscribe to cable’s broadcast tier.
During the hearing, Eshoo said that the basic tier requirement is adding to subscriber costs as cable operators pass along the escalating retransmission consent fees from broadcasters.
“Shouldn’t consumers have the ability to lower their bills by electing to receive broadcast channels over the air?” Eshoo asked Powell.
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Said Dennis Wharton, a spokesman for the National Association of Broadcasters, in response: “NAB supports this law to preserve localism and diversity on cable and to prevent discrimination against broadcast TV by our cable friends.”
Added one Washington communications industry source: “It’s extraordinary that ranking member Eshoo and Michael Powell would raise the issue of alleged unfairness of cable program packaging without mentioning the elephant in the room: a la carte. A truly consumer-friendly cable industry would allow customers to pick and choose every channel they want, and not force them to pay for hundreds of channels that few people watch.”
Powell’s support for the regulatory reform comes as part of a new NCTA initiative to put more of the association’s weight behind the retransmission consent reform effort, a cable TV insider said.
NCTA has previously largely been sitting out the reform campaign because, along with representing cable operators, it also represents major programmers with significant broadcast interests — including The Walt Disney Co., Fox and CBS. In addition, Comcast, NCTA’s largest member, owns NBCUniversal and has a conflict over the retransmission consent regulations.
In December, Powell announced the NCTA’s intent to beef up its lobbying profile in support of retrans reform. “We welcome an examination of a retransmission consent regime that is increasingly fractured and in need of some repair,” he said in a statement at the time.
Despite the association’s internal conflicts with its members, NCTA has previously urged the FCC to crack down on the ability of broadcasters to use sharing agreements to negotiate retransmission consent agreements for multiple stations in a market.
In her opening remarks at the hearing, the first in a series in a multi-year congressional review of the Communications Act, Eshoo also made clear that she believes that Congress should reform the retransmission consent regulations this year. “The current TV blackouts, coupled with the rising cost of broadcast television programming … has left consumers frustrated and looking to Congress and the FCC for answers,” Eshoo said.
Also testifying at the hearing were former FCC chairmen Richard Wiley, Reed Hundt and Michael Copps.
Comments (7)
Don Thompson says:
January 15, 2014 at 4:29 pm
Getting rid of must buy is a solid idea.
I suspect, though, that the Big 4 affiliates have the market power to replicate the must-buy environment through continued reliance upon their blackmail-or-blackout retrans strategy.
Note that Rep. Anna Eshoo’s (D-Calif.) CHOICE Act, co-sponsored with Rep. Zoe Lofgren (D-Calif.) would address the market power issue by requiring the creation of a programming tier that would include all TV channels that elect retransmission consent and by making subscriber purchase of that tier totally optional.
The question then becomes: Do the Big 4 have the market power to demand cable operator payment based on 100% subscriber penetration when actual subscriber penetration is much lower? The answer depends in part, I supposed, on how aggressively the FCC would deal with TV station blackouts under crystal clear interim cable carriage authority in the CHOICE Act. Please follow me on Twitter: TedAtACA
Wagner Pereira says:
January 15, 2014 at 5:27 pm
Of course a much simplier idea is selling BOTH packages and a la carte. I state both, because when a la carte advocates find out their bill will be higher for just 10 channels, they will quickly jump back to cheaper packaged plans.
Tung Bui says:
January 15, 2014 at 5:53 pm
If that’s the case, then I should be able to delete ANY channels I don’t want and save money. Everything should be a La Carte. IF the MSOs want to offer packages with a discount rate to entice me, then put the marketing department to work.
Wagner Pereira says:
January 15, 2014 at 10:08 pm
Actually, thats an incorrect assumption. Of a $100 cable bill, under a la carte, you would be charged roughly $75 for service and then add in the channels you want at a rate of about 10x what they cost now. Thus service with the ESPN Channels would cost roughly $125 alone. Service with only TBS or TNT would cost roughly $85 etc. While you drop channels, the channels you keep would go up in price to account for, unlike you, that decided to drop those channels. Of coure, cable might drop the “Service rate” to roughly $50 or so dollars a month, but then the channels would be marked up higher by the MVPD – instead of 10% of what they are now, about 20x, so the end result is the same – and they point the finger at the Program Providers instead of themselves.
Monica Alba says:
January 17, 2014 at 10:25 am
Here’s my opinion (as a former cable industry AND TV broadcast industry:
Drop all fees to TV broadcasters. OTA free = cable/satellite free
All providers (cable/sat) MUST provide free “basic” to any homes passed (less a reasonable connection fee and any necessary gear/parts needed). To help generate some income (for the providers), they can add home shopping channels, PI (per inquiry) channels, and public access.
This then increases total subscriber count and increases broadcast TV viewership.
As for broadcasters, they’ll have “more eyes” but will survive based on their ability to create program content (especially unique local programming like sports, parades, news, etc.).
As for cable/satellite companies, they’ll be in more homes and can certainly use that opportunity to “up-sell” additional cable services.
AND with the pending “spectrum buy-back”, this can resolve the “what will happen for antenna viewers” question.
EVERYONE will have an opportunity to have free cable/satellite “free basic” service.
Oh.. and very important.. All OTA channels should be carried as “ungroomed” HD or in their native OTA broadcast format. This “crap converting” broadcasters signal to the world looking SD signal with improper aspect ratio MUST stop. If the OTA signal is HD, then the providers should put them on cable as ClearQAM. (No converter should be required for “free basic”.
By the way.. one final note: WHEN will we have FCC commissioners who are nominated to the position that have a CLEAR background?? We “hung poor Alan Freed” for taking payola for playing 45’s on the radio, yet our president puts commissioners in place who have been paid by people for years who their decisions will impact. How is this appropriate?? How can we NOT think that these people will make decisions based on “helping out old bosses”?? This is a very VERY serious conflict of interest!!
Monica Alba says:
January 17, 2014 at 10:28 am
Here’s my opinion (as a former cable industry AND TV broadcast industry: Drop all fees to TV broadcasters. OTA free = cable/satellite free All providers (cable/sat) MUST provide free “basic” to any homes passed (less a reasonable connection fee and any necessary gear/parts needed). To help generate some income (for the providers), they can add home shopping channels, PI (per inquiry) channels, and public access. This then increases total subscriber count and increases broadcast TV viewership. As for broadcasters, they’ll have “more eyes” but will survive based on their ability to create program content (especially unique local programming like sports, parades, news, etc.). As for cable/satellite companies, they’ll be in more homes and can certainly use that opportunity to “up-sell” additional cable services. AND with the pending “spectrum buy-back”, this can resolve the “what will happen for antenna viewers” question. EVERYONE will have an opportunity to have free cable/satellite “free basic” service. Oh.. and very important: All OTA channels should be carried as “ungroomed” HD or in their native OTA broadcast format. This “crap converting” broadcasters signal to the worst looking SD signal with improper aspect ratio MUST stop! If the OTA signal is HD, then the providers should put them on cable as ClearQAM. (No converter should be required for “free basic”.
By the way.. one final note: WHEN will we have FCC commissioners who are nominated to the position that have a CLEAR background?? We “hung poor Alan Freed” for taking payola for playing 45’s on the radio, yet our president puts commissioners in place who have been paid by people for years who their decisions will impact. How is this appropriate?? How can we NOT think that these people will make decisions based on “helping out old bosses”?? This is a very VERY serious conflict of interest!!
Rebecca Barry says:
January 17, 2014 at 1:29 pm
First I don’t agree that A la Carte’ has to cost more than 200-300 channels if we start first eliminating gun boat negotiations forcing providers to take all or none of the program providers offerings many orchestrated to extract more revenue for the provider. If there is no or limited viewer demand for certain channels then the service provider should not be forced to add it at their expense (equipment, transponder space etc).
Regardless of the inflation figures one chooses the days when there was very limited program offering Cable bills for example was generally around $28 or less a month for about 35 channels including local TV stations. With that revenue Viacom built an empire off MTV acquiring several existing channels and launching additional original channels we all pay for now regardless of the fact we never watch them, acquired UPN network and their owned and operated TV stations, CBS and their owned and operated TV stations combining the two by having the FCC allow dual ownership in markets plus Paramount pictures. Viacom was once a Cable provider but due to a conflict of interest government mandated they either rid themselves of their cable ownership or Cable Network business. So Viacom sold many of their cable companies to what became Comcast that over time with the government blessing used their service revenue to buy NBC, Universal Pictures with enough left over to build a 975 feet headquarters building in 2008 announcing today beside their 6 year old corporate headquarters building a 1,212-foot 59 stories high Technology Center Tower at a cost of $1.2 billion. This new building will also house Comcast owned NBC channel 10 and Telemundo channel 62 that they also charge re-transmission fees for.
This is why your service bill keeps going up and up, why A La Carte is DOA cable until these monopolies are broken up and channels must have customers (viewership) to survive like any other business.
Companies like Comcast are monopolies owning TV & Cable networks(NBC, MSNBC, Universal Sports and regional sports networks) local TV stations, original content from Universal and in many cases the only virtual ISP option.
With the recent Federal Court ruling throwing out Net Neutrality Comcast is poised to shut the final monopoly door charge providers like Nexflix and Hula a toll for using their networks to stream a Universal movie Nexflix has paid a licensing fee for while charging the consumer extra for data over the maximum of 300 GB per month.
While the jury is still out I’m sure Canada recent A La Carte requirement will translate to at least a way consumers can control their spending by removing the Must Buy all or none Cable and perhaps local TV stations as well.