PITTSBURGH, May 19, 2010 — The American Cable Association called on the Federal Communications Commission to assert its authority and protect consumers by creating new retransmission consent rules designed to prevent broadcasters from charging discriminatory fees and creating joint negotiating entities in order to further maximize their economic leverage over small cable providers.
"FCC intervention is essential to shield consumers from a broadcast industry bent on abusing its market power to gouge consumers served by small cable operators in hometown America," said American Cable Association President and CEO Matthew M. Polka. "If the FCC's effort yields the kind of level playing field we hope to see, it will take pressure off retail cable rates while freeing up capital vitally needed to accelerate broadband deployment in rural communities in every state."
For many years, ACA has urged the FCC to reform retransmission consent on behalf of consumers, citing numerous public interest harms associated with the 18-year-old status quo. FCC Chairman Julius Genachowski recently agreed to conduct such a review from a consumer-protection perspective, including whether agency rules are causing cable rates to rise in response to broadcasters' escalating demands for more cash from cable operators.
The FCC's timely review comes in the wake of several broadcaster-initiated license fee disputes. In March, the Walt Disney Co. pulled its ABC signal in New York City from approximately 3 million Cablevision Systems Corp. subscribers just hours before the Academy Awards show, the hugely popular film industry event that drew 41.3 million viewers nationally.
In comments filed with the FCC, ACA documented that price discrimination by broadcasters against small cable operators continues unabated, based on market analyses performed at ACA's request by Dr. William Rogerson, Professor of Economics at Northwestern University and former FCC Chief Economist from 1998-99.
In studying the relevant available data, Dr. Rogerson determined that small cable operators pay at least twice as much for retransmission consent per-subscriber as larger pay-TV providers, and that the difference in the prices paid has no basis in the broadcasters’ cost of delivering the signal to cable headends. Small cable and its customers end up paying far more for access to the affiliate and owned-and-operated signals of ABC, CBS, NBC and FOX stations primarily because these broadcasters have significant bargaining power over ACA members, Dr. Rogerson concluded.
ACA also called on the FCC to crack down on local broadcasters that have joined forces to negotiate retransmission consent deals in an effort to more pressure on small cable to overpay for their signals. Although FCC rules generally ban the common owners of two Big Four network stations in the same market, many broadcasters have avoided scrutiny by fashioning alliances not normally reviewable by the FCC, such as local marketing and shared services agreements.
Through these duopoly-style arrangements, one entity is allowed to conduct retransmission consent negotiations on behalf of two "must have" affiliates, resulting in small cable operators paying substantially more for retransmission consent than if the two affiliates had to negotiate separate deals. ACA cited evidence provided by cable operator Suddenlink Communications showing that these broadcaster negotiating alliances drive up the cost of retransmission consent by about 21%. ACA has identified at least 93 sharing agreements or duopolies in 78 television markets, affecting more than 37% of the 210 DMAs and with the heaviest concentration found in smaller markets served by ACA members.
In 1992, Congress gave broadcasters the power to withhold their signals from cable consumers until their cash demands for carriage are met. The FCC is expected to disclose later in the year whether it will launch a proceeding en route to the adoption of new retransmission consent rules.
ACA is a member of a diverse coalition that filed a petition in March asking the FCC to launch a rulemaking on retransmission consent reform. To date, the FCC has sought public comment on the request.
On the FCC petition with ACA were Bright House Networks, Cablevision, Charter Communications, DIRECTV, DISH Network, Insight Communications, Mediacom Communications, New America Foundation, Organization for the Promotion and Advancement of Small Telecommunications Companies (OPASTCO), Public Knowledge, Suddenlink Communications, Time Warner Cable, and Verizon.
About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 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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