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With Evidence of Market Failure All Around, ACA Calls For A Retransmission Consent Investigation By The FCC

Targeted By Powerful TV Stations, Small Cable Is Paying Much Higher Fees For Broadcast Signals In A Dysfunction Market That Requires Prompt FCC Examination

PITTSBURGH, July 30, 2009 - The American Cable Association told the Federal Communications Commission that broadcasters routinely exploit their market power by overcharging small cable operators for access to their signals, a clear example of market failure ripe for further agency investigation.

"Broadcasters have undisputed market power over small and medium-sized cable operators, which results in ACA members having to pay far higher fees per-subscriber for retransmission consent than do much larger cable and satellite TV providers within the same local market," ACA President and CEO Matthew M. Polka said. "If the market is functioning as flawlessly as the National Association of Broadcasters claims, then the NAB should have no reason to oppose ACA's request for an FCC investigation."

ACA urged the FCC to probe the retransmission consent market in comments (available here) filed yesterday in connection with the agency's annual cable competition report to Congress. In the past, the FCC has used the report to indentify market breakdowns and recommend statutory changes for consideration by Capitol Hill lawmakers.

Forced to pay unconscionably high fees to broadcasters, ACA members have become less competitive in the multichannel pay-TV market and have less capital to invest in broadband Internet access service, a critical technology in high demand in the thousands of rural communities where small cable operators have been communications leaders for many years.

Broadcasters distribute "must have" programming, which they leverage to extract unfairly high retransmission consent fees from small cable operators. ACA members are forced to pay because they can't afford to lose customers to their larger pay-TV rivals that have the economic clout to keep their own payments to broadcasters within a zone of reasonableness.

"With major cable operators and satellite TV operators providing the bulk of their viewing audience, broadcasters can withhold their signals from a small cable company with little, if any, downside. Eventually, the small cable company must acquiesce to excessive prices and terms or face subscriber loss," Polka said.

In its comments, ACA noted that retransmission consent abuse is not solely about price discrimination.

ACA pointed out that small cable providers are left with less bandwidth for broadband because broadcasters demand carriage of unwanted broadcast multicast signals and affiliated cable networks. Content tying-and-bundling tactics so familiar to small cable operators only serve to drive up retail cable rates and anger consumers, and they consume scarce network capacity that could be devoted instead to the development of advanced services in actual demand.

"Some broadcasters have gone so far as to insist that ACA members reserve channel capacity for multicast services that have not been created, an audacious something-for-nothing scheme that ought to be put to an end now," Polka said.

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About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing more than 900 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 http://www.americancable.org/

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