Senators Deeply Divided On Retrans Reform

From Sen. Jim DeMint (R-S.C.) pressing for the repeal of both retransmission consent and the compulsory license for programming carried by cable and satellite systems to Sen. John Kerry (D-Mass.) suggesting that the 20-year-old Cable Act has worked pretty much as intended, it was clear at a Tuesday hearing that lawmakers are split on whether to change the relationship between broadcasters and multichannel distributors. But broadcasters may be surprised to learn of one voice in favor of Demint’s approach.

Veteran broadcaster Preston Padden, who noted that he was an executive at Fox Television when the Cable Act passed in 1992, gave a “full-throated embrace” of S. 2008, which Demint titled the Next Generation Television Marketplace Act. Padden, now an adjunct professor at the University of Colorado School of Law, compared the regulatory regime for U.S. television to an “old closet” in need of cleaning.

But while Padden embraced the DeMint bill as “principled deregulation,” he warned that the worst outcome would be to repeal retransmission consent but leave in place the compulsory license, which he declared was a “huge impediment” to new online video distributors who seek to compete with the established players, cable and satellite.

According to DeMint, retransmission consent was created to combat the cable monopoly, which no longer exists. He insisted that there is great interest in local programming, so broadcasters don’t need government intervention to be able to deal with the distributors.

Kerry, however, warned that repealing retrans, must carry, ownership limits and the compulsory license, as S. 2008 would do, would have a profound impact on distribution in the marketplace. He suggested that cable operators would then buy broadcast network rights directly, rather than from TV stations. “It would do nothing to resolve this question of negotiating stalemates,” said the senator, who has been a vocal critic of TV channel blackouts in retrans disputes, “and it would result, probably, in very few broadcasters being around, I would suspect.”

NAB President-CEO Gordon Smith picked up on that theme, suggesting that passage of the DeMint bill could lead to people in Pierre, S.D., having to buy their cars in Minneapolis or Denver because local TV stations would disappear in South Dakota and their local car dealers would also shut down because they couldn’t afford to advertise on Minneapolis or Denver television stations.

Smith emphasized the often heard NAB refrain that less than 1% of retrans negotiations result in any blackout and the more recent charge that most of those blackouts are to be blamed on three operators — Time Warner Cable, Dish Network and DirecTV.

Sitting right next to Smith, Melinda Witmer, EVP-chief video and content officer, Time Warner Cable, insisted that retrans is a “subsidy” for broadcasters. She charged that broadcaster demands are increasing disputes over carriage, leading to a record 69 blackouts thus far this year. According to Witmer, TV stations are demanding more money from cable operators, even as they are cutting back on news.

Colleen Abdoulah, CEO of the small cable company WOW! and a member of the American Cable Association (ACA), charged that the big broadcast and cable networks are paying “crazy, astronomical fees for sports programming because they know with the current business model they can force that cost onto consumers.”

Under questioning by Sen. Mark Pryor (D-Ark.), Abdoulah lamented that she can’t offer a sports-only tier to customers who want it because her contracts with program providers don’t allow for it. And when lawmakers asked about pricing for various channels, Abdoulah said the contracts didn’t allow her to disclose that information, even to a United States Senator. “I’m a very confidential source,” suggested Sen. Jay Rockefeller (D-W.Va.), who chaired the hearing by the Senate Committee on Commerce, Science & Transportation.

Although the topic is not addressed in either the 1992 Cable Act or the proposed Demint bill, Abdoulah called for the outlawing of shared services agreements, where one broadcaster is able to negotiate for cable carriage of another station along with its own. She branded that “collusion” and claimed that small cable operators lack leverage to negotiate with the broadcasters.

Abdoulah also claimed that her company, which has systems in four Midwestern states, has to pay higher rates for retrans than large cable operators because of a lack of leverage.

“She does just fine when she’s at the table with CBS,” said Martin Franks, EVP-planning, policy and government affairs, CBS Corp., who noted that his company had been unable to persuade WOW! to carry CBS Sports Network in the last round of negotiations. “We didn’t have the leverage and the clout. The big, bad media company in New York couldn’t persuade the struggling ACA member to carry one of our channels,” said Franks, who scoffed at the notion that there are weak players who need protection. “They’re not in the negotiating rooms that I’m in,” he said.

Sen. Tom Udall (D-N.M.) noted concerns he’d heard from a small religious broadcaster that they would disappear from cable and satellite if the DeMint bill is passed, since it would, among other things, eliminate must carry.

NAB’s Smith, who happens to be Udall’s cousin, noted that most NAB members don’t need must carry, but that many religious, rural, foreign language and minority stations do. “You wouldn’t have Univision today, you wouldn’t have Fox today — you might like that Mr. Chairman,” he said, drawing a chuckle from the audience. “These great networks developed with must carry because of the wisdom and foresight of this committee to foster this diversity, this niche, this service of all of America,” said Smith, a former senator from Oregon and one-time member of the committee.

Once a strong backer of the FCC’s newspaper-broadcast crossownership ban, Sen. Kay Bailey Hutchison (R-Tex.) declared that she has done a complete turn-around and declared the rule “obsolete.” That prompted Dr. Mark Cooper, director of research, Consumer Federation of America, to note that while his organization had supported the relaxation that has already taken place for the largest markets, there have been no mergers of newspaper and TV operations since the change in 2007.

Cooper had earlier blasted the current retransmission consent system, saying the one certainty is that “the consumer always loses.” Going way back to the birth of broadcasting, Cooper maintained that all of today’s video distribution fights really stem from what he termed “the original problem” of granting exclusive spectrum licenses to broadcasters, and hailed the success of non-exclusive licenses, such as the shared spectrum used for Wi-Fi.

“We can return the public airways to the public for more direct use than at any time in exactly 100 years,” Cooper declared. “If Congress intends to bring spectrum and video policy into the 21^st century, it must avoid making another 100-year mistake. It must move the broadcasters out of the way and provide the maximum opportunity for all the people to use the public airways for their public purposes,” he said.

No senator spoke in support of that idea, or even asked Cooper about it, but that’s a proposition that would undermine the entire structure of American broadcasting, moving far beyond any spectrum reclamation yet proposed by anyone at the FCC.