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Cover Story: Cable's Chief Looks Back — And Ahead

1/17/2009 11:30 AM Eastern

Before President-elect Barack Obama is even sworn in, the young former Illinois senator is already making waves in the TV industry. First, he's asking to delay the nation's long-awaited Feb. 17, 2009, switch to digital broadcasting. And he's recently floated the name of Julius Genachowski for the position of chairman of the FCC. Multichannel News Washington news editor Ted Hearn sat down with the one person who cares more about the president's communications policy than arguably anyone, National Cable & Telecommunications Association president Kyle McSlarrow. The cable industry's point man looks back on a rocky year in Washington, and tells why he's looking forward to a new administration. An edited transcript follows:

MCN: What do you expect from Julius Genachowski, if he's named FCC chairman by President Obama?

Kyle McSlarrow: Well I think I would want to wait until the announcement is official before formally commenting. But if Julius was nominated, he would be an excellent choice and certainly has the policy savvy and real-world experience that will be necessary to tackle the complexity of today's media, communications and technology marketplace.

NCTA chief Kyle McSlarrowMCN: Will the new Obama administration be good or bad for cable, or something else?

KM: I think the good news, so far as I'm concerned, is that at least the transition team has been very engaged, very open to hearing all different points of view.

I think in terms of what it means for actual policies is just too early to say.

I think as long as we have a chance to make our case and be treated fairly, that is all we can ask. I think we have compelling arguments and we may win some, we may lose some, but that is just the normal give and take of the policy process.

MCN: As a Republican, will you have trouble conducting business in a town under total Democratic control?

KM: I don't. In my approach, whether it has been in this job or even when I was at the Department of Energy, I have always treated every member of Congress and every staffer the same, which is to try to be an honest broker — an advocate to be sure — but an honest broker to convey certain points of view and ideas and facts.

MCN: Can you name one or two things that the cable industry wants to see in Obama's stimulus package?

KM: Let me just say by the time we are having this interview (Jan. 12), there is a lot still very up in the air about this entire stimulus package. I think our view is there are some legitimate challenges out there when it comes to broadband and if one assumes, as it seems to be case, that some type of broadband package will be part of the stimulus, I think what we 'want' is for it to be targeted to specific challenges that exist today.

The interesting point is, as we say over and over again, cable's high-speed Internet service is sitting in front of 92% of American households. So to say there is a deployment crisis I do not think quite captures it.

MCN: The better question, I guess, is what should stay out of Obama's plan?

KM: The government should not be in the business of subsidizing one competitor against another. It should be in the business in those areas where it is noneconomic to build out or deploy, or in those instances where there is a true affordability issue and thinking through how to beat those challenges.

MCN: Given cable's problems with the current FCC chairman, Kevin Martin, to what extent would you lobby for or against Obama's FCC picks?

KM: What problems? (Laughs.)

I guess the extent that we are going to lobby is nil. In the conversations that we have had with a variety of people, I think we have been asked our opinion but it has been an opinion about what we see as the challenges facing the FCC. It has not been about particular people.

MCN: Does the retail a la carte issue disappear with Kevin Martin?

KM: I have said it for a long time, I do not think it ever disappears. I mean, certainly, Chairman Martin gave it a lot of visibility just by virtue of his position, but even if you didn't have a chairman of the FCC focused on it, I think there is always, actually, an understandable push for people to say, 'I just want to pay for channels that I want to watch.' I actually understand that. I think our job is to explain why in the retail environment, it does not actually work that way.

MCN: Just how vulnerable is cable's video business, as programming suppliers send their shows free over the Internet?

KM: I think if it ever got to the point where the online distribution was actually cannibalizing viewership and interests, there'd have to be an adjustment. There clearly would be a marketplace adjustment of the value of that programming which will be reflected in cost.

MCN: Are you saying that a decade from now, cable programming won't be sold mostly in large packages?

KM: No, I'm saying it would not surprise me if it is different. I'm not afraid of the future and I do not think many companies are afraid of the future. I think they are trying to understand it. What I'm saying is it would not surprise me if it changes.

MCN: Did you anticipate that we would be facing a potential delay of the Feb. 17 conversion?

KM: I first started to wonder if it might happen when I saw the announcement on the [National Telecommunications and Information Administration] coupon program. That was, I think, a body blow and even though, sort of within the inner circles of people who really focused on this, people have been aware of the issue with the NTIA and the Antideficiency Act.

When it became just sort of a public news story and people started focusing on how many people might be waiting for coupons and not getting converter boxes until after, that was sort of the first time I realized that this actually is going to be seriously considered.

MCN: Do you think it will be delayed?

KM: I can't tell. I really can't tell. I think, just so your readers know, we are sitting here on [Jan. 12] right after the Thursday when [Obama transition co-chair] John Podesta sent his letter to Congress, so I think a lot of meetings are taking place with the transition team and the Hill and with the current administration and we are trying to figure that out right now, but it is certainly a very real conversation.

MCN: Is it right that the NCTA isn't going to create a fuss if Feb. 17 is delayed?

KM: Yes. We have an important responsibility, so our approach from the very beginning … was not a question of supporting it or fighting it; it was, how can we help? And that is the same philosophy that it is going to obtain here.

If it does change, we will try to make the best of that; if it does not, then we are totally focused on trying to get everybody ready in a matter of weeks.

It may be something that we can fix in Congress and maybe that puts it back on track.

MCN: Do you agree with Rep. Joe Barton (R-Texas) that panic has set in?

KM: I think people are right to be concerned, but the question is whether or not the fix should be something targeted to the coupon program, targeted to the Antideficiency Act or something broader, like an extension of the date.

MCN: Is cable going to shut down its public-service announcements advertising Feb. 17?

KM: We are no longer running our ads, and the truth is we actually stopped running our ads late last fall. …

We put the word out because we could tell that, ironically enough, we were helping drive people on the converter-box program. That was what our messaging was designed to achieve and NTIA was starting to get nervous about that.

One of the things we are urging the [Obama] transition team and [Capitol] Hill is, “Look, whatever you are going to decide here, please decide it soon.”

MCN: Is the idea of a retransmission-consent quiet period linked to Feb. 17 moot? Were all the deals done?

KM: There probably were some extensions and they are probably of varying lengths. I do think the end of the year went smoother than people would have expected.

I think, in part, that was because I think a lot of people understood that they did not really want to be the ones responsible for pulling signals and then run up to the digital transition.

MCN: FCC rules say cable MSOs can't discriminate against channels they don't own but cable can't carry everybody who wants a spot on expanded basic. How does that get resolved?

KM: I think what is frustrating about program carriage is that discrimination should be a really high threshold bar. I mean discrimination, you kind of know it when you see it. There is not a single complaint that I have seen that comes even close to that.

It cannot be the right answer that just everybody who has an idea for a channel automatically gets to just claim discrimination and therefore gets sort of forced arbitration and gets carriage.

MCN: When do you expect your major cable MSO members to complete their digital transition?

KM: Well, I do not think there is a hard and fast date.

When I took this job in the beginning of 2005, we may not have even been at 40% digital penetration and I think as an industry we are pretty close to 65% now and it has been accelerating.

MCN: Possibly within three to five years?

KM: I think in three to five years, we may not ever reach a 100% percent digital penetration but I think it will be very high.

I cannot say for certain that there will be no analog service, but I think we will be an all-digital industry in the most meaningful sense.

MCN: Does Congress try to pass network-neutrality legislation in 2009?

KM: I think it comes up. I do not know how big a push there's going to be. I do think the [Comcast] network management case probably will have some effect on Congress' consideration. Leaders on the Hill have said they support it. President-elect Obama's administration supports net neutrality. So I fully expect to be engaged on that issue.

MCN: What about Web privacy and regulation of deep packet inspection technology?

KM: Deep packet inspection — it covers so many things, it is almost meaningless except to a certain engineer in a specific instance.

I think the question is whether or not the existing kinds of rules that govern privacy can be translated into an arena where you have a lot of interactivity taking place with video service in the same way you do in broadband.

And to some extent, the cable industry has always had the most forward-leaning pro-consumer privacy regime of any industry, and I think our posture is that we still want to be the leaders when it comes to protecting privacy. But I do not think anybody has really reached a resolution of whether or not you have to sacrifice privacy in order to achieve the business objective.

MCN: Do you think indecency will be a big issue in 2009?

KM: I think the catalyst for that issue being raised again is probably the court cases. I think the Supreme Court is expected to rule some time this spring, and then, of course, you have other cases making their way through the pipeline.

I think they are going to have a lot of effect on how people think about this set of issues.

MCN: Do you expect the new Commerce Committee chairmen — Sen. Jay Rockefeller (D-W.Va.) and Rep. Henry Waxman (D-Calif.) — will keep cable busy?

KM: I think everybody keeps us busy. We are the cable industry.

September