Retransmission Dispute Results in ND, MN Blackouts

Published May 31, 2016

Midcontinent Communications, a regional cable provider serving North Dakota, South Dakota, and several communities in western Minnesota, lost its feeds for Fox affiliates KNDX, KXND, and two other stations in Bismarck, North Dakota, after failing to reach a new retransmission-consent agreement with station group owner Prime Cities Broadcasting.

Its agreement with Prime Cities expired on Sunday, April 8, and the Bismarck stations went off the air.

Midcontinent is one of several cable stations that have lost broadcast station feeds after refusing to agree to increased retransmission-consent fees.

Tom Simmons, senior vice president of Public Policy for Midcontinent, says the negotiations with the Fox affiliates have been going on for some time but little progress has been made.

“The negotiations have gotten particularly ugly, especially when the Bismarck stations went dark on April 8,” he said.

‘More Pain on Viewers’
The Fox affiliate in Bismarck is the only source for Fox programming in Bismarck, Simmons said.

“They have competition from other stations, but they’re the only ones carrying Fox programming, so that means if we want our customers to be able to see Minnesota Twins games, NASCAR, or American Idol, we have to negotiate with Fox Bismarck,” Simmons explained.

“It looks like they want more money because they want more money,” Simmons added. “They’re doing this by interrupting programming to put more pain on our viewers so they will put more pressure on us to give in to their demands.”

‘Too Much Money’
Matthew M. Polka, president and CEO of the American Cable Association, says this type of situation has occurred all across the country in other markets as well. The broadcast stations are using outdated federal rules to extract cash for free TV.

“The broadcasters say they’re the free TV option, but when you look into it, the money is not going back into local programming—it’s going back to the networks to offset advertising revenue losses because the best programming increasingly airs on cable. This is all a ruse to extract more money from cable and satellite customers’ wallets,” Polka said.

Rising costs for sports programming have played a role in the fight between affiliates and cable operators. “The networks paid the NFL $42 billion for broadcast rights,” said Polka. “They charge the affiliate stations through reverse compensation, and they in turn charge the cable operators retransmission fees which show up on the customer’s bill. It’s not much per individual user, but it adds up to millions of dollars in a particular market, and this is just too much money,” he said.

“The next step is Congress needs to hold hearings and revise the rules to give cable operators more options,” he says.

Increased Content, Lower Costs
Gennady Stolyarov II, editor-in-chief of the libertarian blog The Rational Argumentator, says one of the major problems with the current FCC regulatory environment is it creates artificial “rents” for intermediaries such as local broadcasters, who can collect retransmission fees because they are the “gatekeepers” of certain content under federal law.

“Without this system, an outcome of the misnamed Cable Television Consumer Protection and Competition Act of 1992, it would be possible for cable and satellite stations to acquire content from any of multiple competing parties, instead of the content being monopolized by a particular local broadcaster,” he said.

“In a more market-driven system, [cable and satellite providers] might be negotiating directly with content creators and owners, rather than with politically privileged broadcaster intermediaries. This would increase content variety and lower costs to consumers,” Stolyarov explained.

Antiquated Regulatory Structure
Bartlett Cleland, policy counsel for the free-market Institute for Policy Innovation in Lewiston, Texas, says the solution is a free market, which would leave the negotiation of retransmission consent agreements to the private marketplace.

Ideally, Cleland said, government would remain on the sidelines and just provide law enforcement against wrongdoing rather than interceding into already negotiated contracts.

“Given all the marketplace and technological changes that have taken place since 1992, it’s worth the effort to come up with a legislative solution that stops relying on a 20-syear-old regulatory structure,” said Cleland.

Kenneth Artz ([email protected]) writes from Dallas, Texas.