Retrans: ‘Anti-Competitive,’ ‘Regressive’

(Satellite Business News) — This Thursday will mark the 25th anniversary of passage of a law by Congress that undeniably helped the development of the satellite TV industry, while equally being one of the most regressive, anti-competitive consumer pieces of legislation ever enacted for television viewers to all video services in every quarter of the nation.

On Oct. 5, 1992, the Senate overrode a veto by President George H.W. Bush — the only time during his time in the White House he had a bill passed by Congress despite a veto — to approve the so-called Cable Television Consumer Protection and Competition Act of 1992.

(By the way, though history records the vote to  override the Bush veto as 74 for overriding and only 25 against, in reality the vote was far closer. Once the Senate opponents of the bill realized they would come up a vote or two short of upholding the veto, Senate leaders of both parties “released” the commitments of many senators who faced tough re-elections, or were in difficult political spots, to vote to uphold the veto and allowed them to vote to override it. That is how much cable companies were despised back then.)

By 1992, cable had become a widely spread and popular service in the country. But the prices paid by consumers for cable, and that industry’s horrendous customer service record, had made the cable industry incredibly disliked by most Americans — even though they like the channels they were watching.

At the same time, the viability of delivering national programming channels directly to consumers via satellite dishes had become a proven strategy and business during the C-band era.

An earlier bill, passed in 1984, had re-affirmed the legality of owning and using a home satellite dish. But that law did not address the access to the programming delivered to satellite dishes, and under intense pressure by cable operators, programmers — many of which were owned by cable companies to begin with — had begun scrambling their satellite signals in early 1986.

In many cases, the larger programmers, led by HBO and Showtime, started selling their encrypted channels to home satellite dish owners. 

By the early 1990s, the broadcast industry had finally figured out how to use its leverage — coverage of politicians by local TV stations “news” operations — to scare members of Congress who opposed them politically.

All of these factors came together to produce a bill that not only re-regulated cable prices in most places, but made it illegal for video services to offer local broadcast stations without the permission of the stations’ owners.

This, of course, became known as retransmission consent. The bill also banned cable companies which owned national programming channels, such as HBO, which was then owned by cable operator Time Warner, and Showtime, which was then owned by Viacom, which then owned cable systems, from discriminating against third-party program distributors who wanted to buy their programming on a wholesale basis and sell them to consumers.

At that point, that only meant satellite TV consumers. Consumer Satellite Systems, the C-band hardware distribution pioneer founded by Mike Schroeder, and his late wife, Jan, thus became the first company in history that did not own a video distribution company such as a cable system, or its own satellite capacity, to sell programming to consumers.

The program access rules paved the way for DBS services such as DirecTV and Echostar (now Dish Network) to buy programming and sell it to subscribers.

Some will argue the DBS business would never have gotten off the ground without the program access rules — though the possibility of “small dish” services to compete with cable was one of the reasons the cable bill passed.

But the retransmission consent provisions have been as harmful to consumers in the long run as the program access rules were helpful. Estimates are consumers have forked over $40 to $50 billion in retransmission consent fees to broadcasters.

As the old saying goes, a windfall by any other name is still an obscene profit. Now before any of the broadcasting brethren who stop by this space each Monday morning blow a gasket, one point should be made clear: No argument, none, not one time, has ever been made here that broadcasters should be denied control over who redistributes their stations.

The issue is not about that. It is about the absurd, mind-boggling way the retransmission consent law has given broadcasters — who, after all, started their business using airwaves owned by the public and who have made hundreds of billions of dollars in profit using them — a totally unfair negotiating position versus video services.

And that has unquestionably resulted in countless local stations going dark on satellite TV services and cable systems when the broadcasters’ often unreasonable demands are not met.

Just ask any satellite TV or cable consumer who has lost a local station for days, weeks, or longer during a retrans blackout. The pages of this publication have been filled with such instances.

Moreover, the enactment of the retrans law at first produced a bevy of new, mostly lowly rated national programming channels since cable operators were willing to trade carriage space on their systems to broadcast groups, which also owned national channels instead of paying retrans fees.

So, when the Disney-ABC-ESPN camp forces video services to carry five channels no one cares about if they want to continue offering Disney, the ABC O&Os and ESPN and ESPN-2, that can all be traced back to the original retransmission consent law.

And the view from here, which was not well received by most in the satellite TV business, was that regulating consumer cable subscription rates was nuts from a satellite TV industry perceptive.

I never understood why anyone in the satellite TV business would want to see the government force down cable television consumer subscription rates.

Why not let cable operators raise their rates time and time again, and then undercut them?

All in all, from that satellite TV vantage point, the 1992 cable bill has to be viewed as mixed bag through the 25-year prism. Program access provisions (which the FCC allowed to expire in 2012) were incredibly positive for consumers. Introducing DBS competition to cable was one of the great advances in TV history.

But retrans has been a complete, absolute disaster for consumers that simply makes no sense anymore. Not sure it ever did.

Bob Scherman is the editor and publisher of Satellite Business News, an independent trade publication. Scherman has covered the satellite TV, cable, and related businesses for almost 35 years. Comments on this column can be sent to [email protected].