Broadcasters, Cable Firms Battle Over DTV Fees

Published December 1, 2008

The cable TV industry is urging Congress to step in and ensure broadcasters do not use the switch to digital television as an opportunity to force cable companies to pay “retransmission consent fees” to provide local channels for their customers.

Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, told the House Energy and Commerce Committee in September Congressional intervention is necessary to ensure there are no disruptions of local channel service when the switch is made on February 17.

McSlarrow argued broadcasters’ new insistence on getting paid for the retransmission of their channels—most have long given away their signals for free—could result in channels being dropped or cable customers seeing a spike in their bills to cover the fees.

Regulatory Problem

Jake Ward, director of Washington, DC-based Qorvis Communications LLC, said the threat of dropped channels is real because market forces don’t set retransmission rates. Instead, the broadcasters use their monopoly power to set rates arbitrarily.

“Other [TV network local station] affiliates are not permitted to send their signal into different designated market areas [such as Philadelphia or Buffalo],” Ward said. “These monopolies—and the market control and abusive tactics that follow—result in situations like the one facing many of Time Warner’s subscribers right now, namely blackouts.

“This is less a congressional matter than a case for the Federal Communications Commission,” Ward said. “The commission is being urged by cable operators of all sizes to impose some sort of cap or regulation on the retransmission market to restore some fairness and sanity.

“This could very well be the tipping point for the current transmission consent regime,” Ward added. “This is a government-created problem that should be addressed and fixed by the government. A little attention could go a long way.”

Concerns ‘Laughable’

In response to McSlarrow’s testimony, the National Association of Broadcasters (NAB) said in a prepared statement the cable industry’s concerns are “laughable,” urging both Congress and FCC to reject the industry’s “scare tactics.”

“Cable television is basically a business. They take local channels and package it for free. Then they sell it,” said Dennis Wharton, NAB’s executive vice president for media relations. “They make $15 to $20 extra [per subscriber] for themselves. They are not sharing the extra money they are making with the creator of the product. All we are asking is 25 cents per subscriber, max.”

NAB argues federal regulators should stay out of the way and let negotiations between broadcasters and cable companies continue.

“This is a marketplace negotiation, and it has worked for 16 years now,” Wharton said. “This is a free-market system. The creator of the product doesn’t want someone to take the product and sell it and use the money for themselves. This is against everything business stands for.”

Dispute Likely to Continue

Steve Effros, president of Effros Communications, a Clifton, Virginia-based communications industry consulting firm, said he expects the dispute to continue as the February 17 digital changeover deadline approaches. The result may not be good for consumers, he says.

“From now until the end of the year, you will hear arguments between cable operators and broadcasters,” Effros said. “The broadcasters can black out signals until cable operators pay up. This whole thing is stupid.

“Congress wrote the retransmission legislation in 1992,” Effros added. “The problem is that local broadcasters have the power. And since [charging fees] is in their interest, they don’t want to get Congress involved.”

Tabassum Rahmani ([email protected]) writes from Dublin, California.