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Awkward Moments Ahead With Broadcasters

8/03/2008 4:39 AM Eastern

Orlando, Fla.— Small cable operators face an unavoidably awkward relationship with broadcasters this year: Work with them on the looming all-digital transition — even while engaging in tough retransmission-consent talks with those same TV stations.

That was one big message that came out last week at The Independent Show, the joint annual meeting of the National Cable Television Cooperative, a buying co-op for small cable companies, and the American Cable Association, a lobbying group for independent operators.

At the third annual confab, which had a record 1,213 attendees, the ACA and even the head of a broadcast trade group advised small cable operators to reach out now to local TV stations to jointly coordinate the government-mandated transition to all-digital broadcast signals next Feb. 17 in their markets.

"Despite our issues, and they are many, this is one of these issues where we can all check the guns at the door and try to do not only what’s right — but what is best — for your customers and also for our viewers,” David Donovan, president of the Association for Maximum Service Television, told cable operators.

MSTV has more than 530 TV-station members, and is dedicated to promoting technical quality of free over-the-air television.

Donovan and others at the show said that cable operators need to be taking steps right now to meet with local TV stations in their markets so they can coordinate efforts, make the proper arrangements and buy the necessary equipment for the all-digital transition.

“Don’t wait for Feb. 17,” Donovan said, noting that more than 1,600 TV stations are already operating in digital. “The transition is already here; it’s not coming.”

Waiting for the last minute to plan will create problems, particular for cable operators, according to Donovan and ACA president Matt Polka.

“You don’t want to wait and then have a crunch as you get into the last quarter of 2008 or the first month of 2009 where everyone starts purchasing and trying to install headend equipment and receivers,” Donovan said.

At another session dedicated to the digital transition, NCTC president Jeff Abbas said that Donovan had predicted that the actual evening of the all-digital transition, Feb. 17, will be “a scotch and Maalox night.”

One problem already is that TV stations are making moves, like testing digital signals or going all-digital already, without even telling the cable systems in their markets, which may not be prepared to receive such signals. That happened to Gary Shorman, CEO of Eagle Communications, in one of his markets.

“We found out about it through the media,” Shorman said. “They [the stations] all of a sudden put out a news release saying, 'We’re going to do this conversion,’ and of course there had been no information sent out to us to make this happen. Now we’re scrambling.”

Said Shorman, “The Maalox season actually started a couple of weeks ago, where we found out we have to do some conversions in some relatively rural systems. … You have to find the antennas, you have to find the gear, you have to make sure it hits and can actually receive the signal.”

In an effort to try to start coordinating the transition in the Cleveland market, Massillon Cable TV in Ohio is trying to organize a summit for local cable systems and TV stations there, company president Robert Gessner said.

“It’s still in the works now,” Gessner said of the potential powwow, noting that to date overall regarding the DTV transition, “The communication coming to us from the broadcasters is not extremely helpful. They really haven’t told us much at all.”

ACA's Matt PolkaThere have already been digital-transition coordination meetings in Minnesota and Oregon, with one set for Aug. 7 in Texas and another for Aug. 19 in West Virginia, according to Polka.

“Be proactive, don’t wait, contact your broadcasters now and start the discussion on the actual DTV coordination and the actual transition to digital television,” Polka said.

Even though cable operators have to work with TV stations to facilitate the digital transition, this fall they will start negotiating retransmission-consent deals with those same local broadcasters, potentially contentious talks.

Several ACA-led panels last week updated cable operators about the group’s lobbying efforts in Washington regarding retransmission consent, which include asking Federal Communications Commission chairman Kevin Martin to impose a “quiet period” between broadcasters and cable operators during the coming round of retransmission consent negotiations to prevent public confusion during the digital transition in February.

Retransmission consent agreements for 3,000 to 5,000 independent cable systems expire Dec. 31, according to the ACA.

TV stations have until October to declare if they are electing must-carry status or retransmission consent from cable systems. Broadcasters that opt for retransmission consent are expected to be aggressive about seeking cash compensation for carriage of their stations this round of talks.

Chris Cinnamon, the ACA’s outside counsel, offered an “advanced course” on negotiating retransmission consent deals.

He noted that the FCC mandates that both stations and cable operators must engage in “good faith” negotiations in retransmission-consent talks. If a broadcaster violates that duty, Cinnamon said, “You do have a right to file a complaint with the FCC.”

But there have only been 11 complaints that cable operators have lodged with the FCC on that issue, and most of them have been withdrawn.

“What do these cases tell us?” Cinnamon said. “Not a whole lot.”

During his session, Cinnamon also cautioned cable operators to be wary about five points regarding contracts. First, he said systems should carefully examine a station’s terms for carriage of its digital signals for the all-digital transition next February.

Chris CinnamonSecond, Cinnamon suggested operators keep most-favored nations clauses out of their retransmission-consent deals. Those clauses could mean that a system has to pay the same cash compensation to all of the stations in its market.

Thirdly, if a station changes the content it provides, there should be a change in the price an operator might be paying for that station.

Fourth, cable operators should demand that if a station is sold, its buyer must honor the existing retransmission-consent deal.

And finally, Cinnamon suggested that cable operators negotiate carefully regarding non-disclosure terms, since they might want the right to tell subscribers how their programming costs have increased because of a new fee they’re paying a broadcaster.

Also at the show Steve Friedman, chief operating officer of Wave Broadband, was named chairman of the ACA; and Jerry McKenna, senior vice president of Cable One, was named NCTC chairman.

September