At 8:30 p.m. last Sunday night, an estimated 41.3 million people sat down to watch Hollywood celebrate its big night -- the 2010 Academy Awards. However, 3.1 million Cablevision's subscribers in New York, New Jersey and Connecticut had to sit in the dark for 13 minutes until a last minute deal was struck between the cable operator and Disney, ABC's parent company, in a dispute over “retransmission consent” fees.
This is only the latest in a series of breakdowns that are caused by fundamental problems in the outdated regulatory structure surrounding retransmission consent that gives too much power to one party (the broadcaster) and provides little recourse for cable companies and their customers.
The current rules were established in the early 1990s when most cable companies had a monopoly position in the marketplace as a result of the exclusive or de facto exclusive franchises they had previously been granted. And the rules in essence ensured that a local station was the monopoly provider of network programming by prohibiting cable companies from importing “distant signals” – the same network programming from a broadcast station in another community. For example, in the case of ABC and Cablevision, Cablevision was prohibited from securing ABC programming from another broadcaster in another community which may have been willing to allow the retransmission of its signal at a lower price.
Since the rules were written, satellite video services have flourished and companies like Verizon have entered into the local video marketplace. Consumers have a choice among video providers. Yet, the current rules continue to protect the local broadcaster’s monopoly.
Not only is the broadcaster’s monopoly over a network’s programming protected, but the FCC rules also remove other potential “bargaining chips” that a cable provider could use. Here are some examples:
--the rules require that local broadcast signals be carried on the ‘basic tier’. What that means is that if a broadcaster wants to suddenly start charging a very high rate for access to its programming, the cable operator has no choice but to pass that cost through to ALL of its customers rather than having the option of creating a new tier for paid local TV to which customers could choose to subscribe.
--channel placement is guaranteed to the local broadcaster, so the cable company can’t move “Channel 9” to channel 126.
--the rules are set up in a heads-I-win-tails-you-lose fashion by denying the cable operator the right to withhold or demand payment for carriage, but granting broadcasters the right to withhold programming and demand payment. We have seen that right exercised recently, much to consumers’ detriment.
These antiquated rules are preventing a balanced negotiation between the broadcasters and the cable provider with consumers paying the price. We do not prefer additional FCC intervention into the marketplace and what should be negotiated commercial agreements between a content provider and the cable company. Instead, we believe that the anachronistic rules that are causing the problem should be changed to permit a balance negotiation to occur. It is time for the FCC and both sides –broadcasters and cable providers -- to come together to develop a new negotiating framework that favors neither side and does not put consumers in the crossfire.