PITTSBURGH, May 19, 2008 -Citing the story of an independent cable provider in New York State as further evidence of egregious market abuse by certain programmers, the American Cable Association (ACA) today urged the Federal Communications Commission (FCC) to address the broken wholesale marketplace.
In a letter (available here) sent to FCC Chairman Kevin Martin by ACA President and CEO, Matthew Polka, the association pointed to Lifetime Entertainment Services' ("Lifetime") forced removal of Lifetime, a popular women's channel, from CableCom of Willsboro, a small cable operator offering video and broadband services to fewer than 1,100 subscribers in Willsboro and Essex, New York. Lifetime pulled the channel after CableCom refused to carry more channels and pay higher fees.
"No one knows its customers better than CableCom whose owners and employees have been living and serving their communities in rural upstate New York for more than two decades," said ACA President and Chief Executive Officer Matthew M. Polka. "But more and more, it is not the local cable operator and customers but the media conglomerates that dictate the programming that will be offered, the rates that will be charged, and the services that are available.
"The market is not working for small operators and their customers, and the Commission must address the programmers' market abuses as part of the ongoing Program Tying Rulemaking," added Polka. "'Take it or leave it' tying arrangements and withdrawal of programming force more cost and unwanted content onto consumers and run counter to the public interest."
Lifetime delivered a "take it or leave it" contract that required the small cable operator to add the Lifetime Movie Network to its expanded basic tier in order to continue carrying Lifetime Television, along with the threat to discontinue service in an April 8th, 2008 letter. CableCom owner and operator, Herb Longware explained the situation and requested the FCC's assistance to prevent service disruption in an April 28th, 2008 letter.On May 12th, Lifetime, owned 50/50 by media conglomerates the Hearst Corporation and the Walt Disney Company, summarily discontinued service of the popular Lifetime Television network from CableCom of Willsboro.
The following is the complete text of the letter:
May 16, 2008
The Honorable Kevin J. Martin
Re: Summary withdrawal of the Lifetime channel from a small cable company that would not immediately move the Lifetime Movie Network to the basic tier
Dear Chairman Martin:
I write to provide you and the Commission additional evidence of large programmers' ongoing abuse of market power against small cable operators in wholesale programming transactions. This evidence of "take it or leave it" tying arrangements and withdrawal of programming is directly on point for the ongoing Program Access Rulemaking, MB Docket No. 07-198, and we will be submitting this letter in that docket as well.
This Monday, May 12th, Lifetime Entertainment Services, the programmer owned by media conglomerates The Hearst Corporation and The Walt Disney Company, summarily pulled the popular Lifetime Channel from all basic subscribers of small cable operator CableCom of Willsboro. CableCom is operated by Mr. Herb Longware and serves less than 1,000 customers in rural New York. Herb and his parents built the system, and it has delivered cable service to its small subscriber base for more than two decades. The system also delivers digital cable and high-speed cable modem service. The system was among the first in the area to offer broadband internet access.
Lifetime pulled its signal from CableCom for one reason - CableCom declined to sign a contract that would obligate it to move Lifetime Movie Network from CableCom's digital tier to analog basic, requiring all subscribers to pay additional programming fees for the channel. Lifetime delivered its "take or leave it" contract along with the threat to pull the Lifetime Channel in a letter dated April 8, 2008 (Exhibit 1). Four-and-a-half weeks later, Lifetime terminated the signal, impacting all of CableCom's customers.
By letter dated April 28, 2008 (Exhibit 2), Mr. Longware explained the situation to the Commission. You will note from his letter that carriage of Lifetime Movie Network on analog basic would require him to drop other channels or divert bandwidth from cable modem service.
The summary withdrawal of Lifetime from CableCom and its customers shows yet another example of abuse of market power by a media conglomerate-controlled programmer, and complete disregard of the interests of rural cable operators and consumers. Moreover, Lifetime's demand for distribution of additional channels by CableCom further demonstrates how tying and bundling undercuts broadband deployment.
On the record in the program access proceeding, the media conglomerates claim they offer small cable operators "a menu of flexible options" and never engage in "take it or leave it" bargaining. We reiterate here what we demonstrate in detail on the record: For small cable operators, wholesale programming and retransmission consent transactions are rife with "take it or leave it" tying and bundling arrangements and price discrimination. To deal with concerns about cable costs and lack of choice, policymakers need to address wholesale practices. Therein lay the problems.
We encourage you and your colleagues to continue your scrutiny of wholesale programming and retransmission consent practices and to consider the rule changes suggested by ACA and others.
Matthew M. Polka
President and CEO
American Cable Association
cc: Commissioner Michael J. Copps (via email: Michael.Copps@fcc.gov)
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About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing 1,100 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit www.americancable.org.
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