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ACA Applauds FCC’s Look At Broken Programming Market

FCC’s Move Highlights Abuses By Large Programmers That Are Seen By NCTC As Preventing Consumers From Receiving Lower-Cost Packages

PITTSBURGH, February 25, 2016 - The American Cable Association applauded the Federal Communications Commission's decision to examine whether major programming suppliers abuse their market power in negotiations with multichannel video programming distributors (MVPDs) in ways that harm not only the MVPDs and their customers, but also independent programmers that often get locked out of the market.

"The FCC's decision to look at the impact of the market on the health and welfare of independent programmers could not come at a better time," ACA President and CEO Matthew M. Polka said. "The market is rife with abuses, causing smaller MVPDs to pay more than they should for programming and to distribute channels unwanted by their customers, guaranteeing the number of subscribers taking their networks."

This combination, in addition to other harms, puts independent cable channels at a competitive disadvantage when congested cable systems simply lack the network capacity to experiment with innovative new channels. The National Cable Television Cooperative (NCTC), the buying group for more than 750 small cable operators, sees these problems first hand. 

NCTC CEO and President Rich Fickle said, "While we've completed many distribution agreements with new networks over the last few years in an effort to support diversity in content, unfortunately, our member operators are prevented from broadly supporting these networks as a result of the forced carriage terms demanded by large network groups. Operators do not have unlimited capacity, and the large network groups mandate the perpetuation of large bundles of content that carry substantial cost increases and are required to be delivered to almost all video customers. In addition to limiting operators' opportunity to launch independent networks, this guaranteed carriage of multiple networks severely limits their ability to offer smaller, more affordable packages that would be ideal for many new content offerings to grow their audience.

"Recent negotiations have also included attempts by large content companies to discourage operators' support for competitive OTT services. There is very high resistance by these content suppliers to support terms that provide consumers with lower-cost options through cable operators. One might conclude that their strategy is to make existing cable offerings increasingly less attractive to eventually encourage consumers to switch to direct-to-consumer OTT substitutes launched by the large network groups but in a managed time frame to limit competition while optimizing short term financial gains." 

ACA's Polka noted that his organization has been an industry leader in calling attention to the onerous prices, terms and conditions that media giants inflict on smaller cable operators. Over the years, ACA has shown that MVPDs' inability to create "skinny packages" or to offer expensive sports channels and retransmission consent TV stations as optional purchases has caused monthly pay-TV bills to skyrocket.

"With the release of the FCC's Notice of Inquiry, the programmers behind these unfortunate market trends will finally come under the close scrutiny they so clearly deserve," Polka said.

ACA and NCTC applaud FCC Commissioner Mignon Clyburn for her leadership in recognizing that the marketplace is not working for independent programming and smaller MPVDs, and pushing for the release of this inquiry, which is a good start to addressing these problems.

ACA is hopeful that the FCC's NOI will focus on onerous requirements in cable company carriage contracts that require a high percentage of subscribers to take - and pay for - the programmers' suite of shows, regardless of popularity. These provisions, known as guaranteed minimum penetration clauses, have been criticized by consumer advocates and others for limiting customer choice.

Smaller MVPDs intend on keeping the FCC fully informed about the inflexible demands of major programming suppliers, such as the penetration guarantee requirement and charging fees for video content to Internet-only subscribers.

 "Besides reducing consumer choice at a time when subscribers are increasingly seeking low-cost cable TV choices and accessing their favorite programs online, this ‘penetration guarantee' requirement hinders our ability to take on new independent and diverse programming," said Elaine Partridge, VP of Programming for NewWave Communications. "These outdated requirements limit our ability to offer subscribers inexpensive options, including the low-cost ‘lifeline' and local cable packages."

NewWave is a provider of video, broadband Internet access, and phone services to more than 135,000 subscribers in Missouri, Arkansas, Illinois, Indiana, Louisiana, Mississippi and Texas.

Jim Holanda, CEO of RCN Telecom Services and Grande Communications, underscored the harms caused when consumers are unable to opt out of expensive programming and the disproportionate impact on low-income viewers.

"These restrictions are a version of anti-consumer bundling, greatly limiting consumer choice and flexibility and keeping our viewers' fees artificially high. It forces subscribers to buy services they do not want, and hurts low-income consumers who would choose not to pay extra monthly charges to simply watch the local broadcast cable package," Holanda said.

RCN is a provider of cable television, broadband Internet access, and digital phone services to about 400,000 residential and business customers, with primary service areas in Boston, Chicago, Lehigh Valley (PA), New York City, Philadelphia and Washington, D.C.

Hundreds of ACA/NCTC members are expected to attend ACA's Washington, D.C., policy summit on March 2 and to visit Capitol Hill offices the next day.  For more details, please go here.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 750 smaller and medium-sized, independent cable companies who provide broadband services for nearly 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/

About NCTC: The National Cable Television Cooperative, Inc. (NCTC) is a Kansas not-for-profit corporation that operates as a programming and hardware purchasing organization for its member companies who own and operate cable systems throughout the U.S. and its territories. NCTC seeks to maximize current and future opportunities to ensure the profitability, competitive stature and long-term sustainability of its member companies.

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