After a decade of networks mainly negotiating for additional new cable channels, in 2005 broadcasters finally began to monetize their cable carriage on a regular basis. That revenue is fair in a marketplace where cable programmers have obtained ever-increasing fees for carriage, while top broadcast stations consistently deliver higher ratings in cable homes than most cable programs. Here’s some of the backstory of how that momentous change came to be.
Mostly forgotten in today’s multi-billion-dollar annual marketplace of broadcast retransmission consent is the long and winding web of regulatory and legal decisions that decades prior shaped the future of the broadcasting and cable industries in the United States, keeping over-the-air broadcasting vibrant and relevant in local communities.
After Congress passed the Cable Act of 1992 following the end of the prior must-carry rules that were vacated in Century Communications Corp. v. FCC in 1987, the staff of the FCC’s Mass Media Bureau diligently set about writing new rules of implementation. Cable pushed back hard, and President Bush vetoed the Act early in October of 1992.
Congress then voted to override his veto for the only time in the Bush presidency by votes of 74-25 in the Senate and 308-114 in the House, leading to the cable industry court challenge led by major cable programmers and operators — Turner Broadcasting v. Federal Communications Commission.
As the director of operations for WOFL-TV Orlando, Fla., I’d worked with the FCC on broadcast-cable issues, and been involved in generating research in two other seminal legal-regulatory issues in the preceding years before the Congress and courts in the Satellite Home Viewer Act (SHVA) in 1988, and in 1989 United Video v. FCC, the legal case surrounding the WGN-TV superstation and syndicated program exclusivity rights (syndex).
Both SHVA and Syndex eventually fell in local broadcasting’s favor, but a failure to guarantee cable carriage rights likely would have quickly led to the failure of hundreds of stations and the downsizing of most others as local cable systems ramped up increasingly competitive advertising sales and news efforts to compete with traditional television stations, and took actions to make cable carriage of local broadcasters either unavailable or disadvantaged.
I had originally raised the possibility of eventual payment to broadcasters by cable systems for carriage as early as 1989-90, which was generally met with broad skepticism and even laughter from my cable friends and acquaintances.
The Supreme Court first heard a challenge in Turner Broadcasting v. FCC from cable to must-carry and retransmission consent in 1994, and by a 5-4 vote remanded the case to the U.S. District Of Columbia Court in Washington.
Justice Anthony Kennedy’s slim majority opinion was clear that in order for the must-carry/retransmission consent rules to be upheld, the broadcasters and the government would need to present much greater evidence of actual harm, anticompetitive behaviors, and what the impact of affirming the rules would be on the cable industry as a whole, rather than the mostly anecdotal evidence originally offered.
Late in 1994 another broadcast consultant, Susan Harrison, called to let me know NAB was looking for experts to assist with the appellate remand case. I reached out to Ben Ivins, longtime NAB counsel who I’d come to know as we both used an obscure private cable copyright database (Cable Data) kept for the Library of Congress.
Cable Data was used mostly to help with copyright payments to broadcasters, but also contained a wealth of historical information on broadcast carriage by cable systems nationwide. I’d used this database to generate single-market cable carriage reports, but knew it had the potential to be tapped for far greater purposes should the need ever arise.
I’d also used specialized Nielsen reports to look at broadcast station ratings in cable homes which had then been used on Capitol Hill to help pass SHVA, as well as in the United Video case.
By December, Ivins had arranged for me to brought on as an expert to help expand the pool of stations demonstrably suffering harm without must carry, some of whom I’d worked for on a consulting basis. After an initial meeting with dozens of lawyers and other experts at the Department of Justice in January of 1995, I approached the late Bruce Ennis of Jenner & Block, a brilliant Supreme Court counsel, with a plan to try and generate the data needed to meet Justice Kennedy’s demands.
In a meeting with Jenner & Block attorney Donald Verrilli (who eventually became President Barack Obama’s last solicitor general) Ennis agreed, and I left the station harm portion of the case to David Schutz, an expert in station valuations who specialized in macro-economic station impacts. Schutz and I were subsequently ensconced in basement offices working up to 22 hours a day for the next several months building the foundation for the case.
Attorney Kit Pierson was the day-to-day point counsel for Jenner & Block on Turner v. FCC, and he subsequently spent many weeks negotiating with Nielsen about utilizing its data in the case, which was otherwise forbidden under Nielsen’s rules. Only after multiple extended meetings in New York and agreeing to an extremely secretive protective order limiting who the data could be shared with, as well as agreeing to not question methodology, Nielsen consented to allow its data to be used in a court proceeding for the first time.
The written expert opinions generated from the Nielsen data were considered so sensitive that even counsel for NAB received only heavily redacted copies comparable to a FBI or CIA report marked Top Secret.
The combination of Nielsen’s data and the Cable Data copyright database provided the tools to finally generate accurate research on nationwide broadcast impacts in the years without must carry. A follow-up conversation with Nielsen’s New York cable offices eventually yielded that a previously-unknown database could be made available that would show every cable channel and broadcast station change on virtually every cable system in the U.S. over the prior three years, including the date it had occurred.
That report, detailing thousands of pages of data, was used to build a profile of what had actually been happening in the U.S. cable/broadcast world over the preceding years, as well as to largely dismantle the claims of harms put forward by local cable systems and cable programmers.
The Cable Data reports, generated for the first time on a nationwide basis, showed the minimal actual impact of less than 6,000 added must-carry stations in a cable universe of then 350,000 channels on combined individual systems across the country.
Nielsen data was also generated that showed independent local stations achieved equal or higher ratings than many well-known cable-exclusive networks in cable homes, largely deflating the previously assumed argument that cable viewers preferred cable programming. In sum, an estimated 100,000 pages of original research were generated in support of the broadcasters’ case.
The D.C. Circuit Court subsequently decided the remand case 2-1 in favor of the broadcasters, but the decision also offered a strong minority opinion.
Combined with the fact only one solid yes vote from the 1994 case was still on the Supreme Court (Justice John Paul Stevens), compared with the four dissents (Justices O’Connor, Scalia, Thomas and Ginsberg), many felt must carry and retransmission consent were in serious trouble after an oral argument in October 1996 that served as the first case heard by Justice Stephen Breyer (replacing Justice Harry Blackmun), who was known to be generally unsympathetic to anticompetitive cases.
The oral argument included a major error from acting Solicitor General Walter Dellinger which was subsequently reported as fact by The Washington Post and The New York Times, affording me an opportunity to have the Times print a correction in their letters section a few days later.
To the surprise of many in both broadcasting and cable, when the final decision was announced in April of 1997 Justice Kennedy again authored the 5-4 majority opinion in upholding the rules, joined by Chief Justice William Rehnquist and Justices Souter, Stevens, and Breyer with Stephens and Breyer offering separate concurring opinions.
Especially notable was Justice Breyer’s concurrence where he wrote his inability to concur with the anticompetitive section of the majority opinion, but agreed with the remainder, making the decision likely one of the closest in the history of the Supreme Court.
Justice Kennedy repeatedly cited from expert reports supported by the thousands of pages of additional data that was submitted to the D.C. Court in his opinion, much of which came from the Cable Data and Nielsen reports uniquely generated for the case.
After a decade of networks mainly negotiating for additional new cable channels, in 2005 broadcasters finally began to monetize their cable carriage on a regular basis. That revenue is fair in a marketplace where cable programmers have obtained ever-increasing fees for carriage, while top broadcast stations consistently deliver higher ratings in cable homes than most cable programs. Retransmission revenue also allows stations to maintain and potentially expand service to their local communities, the hallmark of broadcast television in the United States of America.
Tom Meek is the former director of operations for WOFL Orlando, Fla., and a media consultant who founded his company TVCCS in 1987. In addition to his consulting work, he is the president and managing editor of the website LAjazz.com and a contributing writer to LA Weekly. He can be reached at [email protected].