Bob Saunders, president of the broadband DSL cable provider, sees a business in streaming broadcast signals and other programming via the Internet to paying subscribers in small, rural communities. While broadcasters are wary of others distributing their signals, Saunders says he’s not trying to get something for nothing: “We want to pay retransmission where it’s required. We want to be a good actor on the scene.”
Bob Saunders is feeling misunderstood these days.
He is not, he claims, a video pirate out to hijack local broadcast signals and resell them on the Internet.
Rather, he says, he is a friend of TV stations, who could be a great help in getting their signals to remote homes via the Internet. “We would be great partners for the broadcasters.”
Saunders is president of Skitter, a four-year-old company whose principal business is running cable systems in small, rural communities using the broadband DSL lines of local telcos. Skitter has its own IPTV technology to provide the service.
Right now, Skitter is working with so-called tier three telcos in nine towns, including Galva, Kan.; Auxvasse, Ore.; and Falls City, Neb. So far, only the system in Galva, which has served as a test bed for the technology, is up and running. There are 700-800 such telcos around the country with an average of roughly 5,000 customers each.
But Skitter also wants to leverage its facilities in each community to create a second business streaming broadcast signals and other programming via the Internet to paying subscribers throughout the entire DMA.
Such a service would be based on Saunders’ belief that the compulsory copyright license that allows cable and satellite systems to carry broadcast signals extends to online video distributors like Skitter that behave like cable systems.
It was this business that landed Saunders and Skitter in hot water with broadcasters in the Portland, Ore., DMA where it is building a cable system with the Stayton Cooperative Telephone Co., which serves 10,000 customers in Stayton.
In lining up programming for the dual cable-Internet service this spring, Saunders says, Skitter sent letters to the Big Four affiliates in Portland asking for retransmission consent — permission to carry their signals.
According to Saunders, Skitter struck agreements with two of the station, New Vision’s KOIN (CBS) and Fisher’s KATU (ABC), but never heard back from the other two, Meredith’s KPTV (Fox) and Belo’s KGW (NBC).
Saunders says that it was his understanding that under FCC rules he could carry the signals of stations that ignored his retrans requests for 30 days.
So with two retrans deals by agreement and two by default, Saunders says, Skitter launched its Internet service in March with all four stations, even though the related telco-based cable service was still months away from operational.
The service didn’t last long.
After a story on the Skitter service appeared on tech news site Gigaom.com in early April, the Portland broadcasters protested, pointing out that Skitter had no right to distribute their signals over the Internet and demanding that Skitter remove their signals from the service.
According to Saunders, he readily complied with the demands, acknowledging that the applicability of the compulsory license to online video is unsettled and that he should have had a clearer arrangement with the Portland broadcasters.
“This is where the mea culpa comes in,” he says. “We’re new in this business. We’re not trying to do something to anybody. We’re not asking for something for nothing. We’re a cable operator and we want to be a cable operator. We want to be part of the community. We’re naïve.”
According to Patrick McCreery, GM of Meredith KPTV, he had not ignored Skitter’s request for retrans and was, in fact, considering it when he learned through the Gigaom article that Skitter had launched the online service with KPTV and other broadcast signals.
That revelation cut short any deal. “We are not allowed [to deal with Internet distributors] because of our network agreement,” he says. “We just can’t do it.”
McCreery says he has no ill will toward Skitter and is willing to discuss retrans for Skitter cable system in Stayton. “They haven’t come back to me to ask.”
The other affiliates in the market (or their bosses at the group level) either declined to comment on the record or did not return phone calls. An executive at New Vision (KOIN) didn’t want to talk because the group is in the process of being sold to LIN Media.
Concerned that the trouble with broadcasters in Portland might interfere with retrans deals for Skitter’s telco-based cable systems, Saunders says has been trying to repair relations with broadcasters, including executives at Belo, NBC and the National Association of Broadcasters.
Even though he is not pressing the issue, he still believes that Skitter is deserving of the compulsory license because it would operate as a full-blown cable system somewhere within each DMA and reception requires a set-top box like those of Roku or Western Digital.
Such attributes distinguish Skitter from other would-be online distributors of broadcast signals like ivi.tv and Aereo that are battling broadcasters in federal court over copyright, he says.
“Why would they have the rights to be treated as a cable TV system when they haven’t made the multimillion dollar investment in the facility that cable TV requires? We made the multimillion dollar investment.”
Todd Weaver, CEO of ivi.tv, says that from what he knows of Skitter it is no different than ivi.tv and both are equally deserving of the compulsory license. “The compulsory license is written broadly, it does not require a set-top box to fit within the actual definition of a cable system.”
Saunders says that he tried to make Skitter’s online service palatable to broadcasters by restricting distribution of broadcast signals to their over-the-air DMAs.
“We were pretty careful about that. What we did is we said you have to prepay for the service and you have to use a credit card. We match the credit card to the address and they say where they live and they want the service to go to. If the two don’t match, we deny them service.”
Saunders says that Skitter also tracks the IP addresses of potential subscribers and compares them with what they say their location is. “We found that some were spoofing us so we shut them off.”
For the online service, Saunders envisions charging $12 to $15 a month for a “lifeline” lineup of broadcast signals, depending on the bandwidth costs.
And he is confident there is plenty of demand for such a service. He says that Skitter received an email from a Pennsylvanian who wanted basic TV service. He was beyond the reach of cable and satellite (a mountain was in the way), but had broadband service from a rural telco.
“That’s the market that we think is about 1% of the DMA that we think we can touch in partnership with the broadcasters.”
Should the court in the ivi.tv case find that the compulsory license does apply to online video, Saunders believes that broadcasters should exploit to opportunity and that Skitter would be an ideal partner in the DMAs in which it is providing cable service.
Such a service would stretch the reach of the affiliates and generate another revenue stream for them, he says. “We want to pay retransmission where it’s required. We want to be a good actor on the scene.”