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DOJ OKs NCTC’s ‘Proxy’ Plan

10/21/2003 10:17 AM Eastern

The Department of Justice has signed off on the National Cable Television Cooperative’s plan to modify the way it negotiates carriage deals, clearing the way for the co-op to try to make the most of its leverage by guaranteeing programmers a certain volume of subscribers.

The NCTC -- which represents small independent cable operators -- had asked the DOJ’s Antitrust Division to review its proposed changes for joint purchasing for any alleged violations of antitrust laws. The DOJ late last week issued a statement saying that it would not challenge the NCTC’s modifications.

The NCTC’s more than 1,000 member companies have over 15
million subscribers, but the co-op has had a difficult time guaranteeing programmers a set amount of homes as part of carriage deals, as its members would typically only decide whether to participate in a master contract after it had been negotiated. Guaranteeing a network a certain amount of homes typically gets a cable operator a better license fee.

The NCTC is looking to institute a procedural change in which co-op members that are interested in participating in a certain master-affiliation agreement would have to commit in advance, agreeing to be part of that contract at the specific price parameters the co-op is seeking.

"The NCTC is hopeful that this approval will help us to negotiate more moderate programming-price increases for our members, which, in turn, will allow them to offer their customers more moderate retail price increases," NCTC president Mike Pandzik said in a prepared statement.

In essence, the NCTC will be giving members the option of signing what amounts to a proxy that gives the co-op negotiating power on their behalf.

"We are always looking for ways to leverage our size better and better, just as everybody else does," said Frank Hughes, the NCTC’s senior vice president of programming. "It’s just a different way of doing things than we’ve done in the past, trying to get away from the more traditional hunting-license type deals and really get deals with commitments."

If a member commits to what the NCTC is looking for, then the co-op fails to close a contract with the programmer in question, the member is then barred from going out and negotiating its own individual deal with that programmer for a set time period, reportedly two years.

"We just felt that we needed to come up with some creative new and innovative ways to deal with renewals and new agreements," Hughes said.

In his business-review letter, R. Hewitt Pate, assistant attorney general for the antitrust division, wrote, "There is no danger that NCTC’s procedures will facilitate retail price collusion because those cable systems [the co-op’s members] do not compete with each other in the sale of MVPD [multichannel-video-programming-distribution] services to consumers."

In fact, Pate suggested that since the changes may result in lower programming costs that would be passed on to consumers, the NCTC’s actions "could have pro-competitive effects."

September