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Policy

Cable Act Review Splits Along Battle Lines

7/30/2012 12:01 AM Eastern

WASHINGTON — The Senate Communications Subcommittee
began its vaunted review of the Cable Act
of 1992 last week with few fireworks and essentially the
same divide over deregulation between those like Sen.
James DeMint (R-S.C.), who are ready to gut that law,
and those like Sen. John
Kerry (D-Mass.), who
wants to get the government
more involved
in resolving retransmission
disputes.

The hearing was more
like the beginning of a conversation — as one of the senators
noted — but its topic was very familiar: the retransmission-
consent rules that govern pay TV providers’ access
to over-the-air TV stations.

There was almost no talk about the impact of over-thetop
video or the fate of program-access or carriage rules.

Witnesses with broadcast interests talked of a system
that worked, of getting paid for valuable content and
warned of the dire consequences of deep-sixing “retrans”
regulations.

Cable operators told the Senate the system was broken,
broadcasters were colluding to drive up prices and Congress
should step in to help viewers.

LACK OF URGENCY

With only a handful of days until Congress exits for its
August recess, and not much time after that until almost
everybody heads home to campaign for re-election, there
was a lack of urgency on a topic that had seemed primed
for sparks aplenty.

After hammering cable operators about rising rates in
his opening statement, committee chairman Jay Rockefeller
(D-W. Va.) hustled senators through their questions,
asking none himself.

Six witnesses, including WideOpenWest CEO Colleen
Abdoulah, pulled from the Independent Show convention
in Orlando, Fla., and former The Walt Disney Co. lobbyist
Preston Padden, now an adjunct law professor at the
University of Colorado, were questioned for only about 45
minutes before the hearing was gaveled to a close.

Broadcast- and cable-industry sources suggested the
hearing was primarily a courtesy to DeMint, but one of
the sources added that they expected the issue would get
“many more opportunities” for Hill vetting, just not in this
Congress.

Cable operators on the panel got to make their points,
however, including Abdoulah, newly-elected chair of the
American Cable Association. She said the smaller, independent
cable operators represented by her trade group
did not have the leverage to be the “gatekeepers” the senators
were talking about when they expressed concerns
about paring back Cable Act regulations.

She got an assist in that argument from Sen. Tom Udall
(D-N.M.), who said he had heard from small rural cable operators
that they were paying more for programming than
larger MSOs in markets like New York and Los Angeles.

“What explains that difference?” he asked, lobbing the
pitch over the plate.

“Leverage,” Abdoulah said. WOW’s leverage is cutting
off 5,000 or 500 subscribers, she pointed out, while an
MSO like Comcast can withhold 24 million subscribers.

Rockefeller and Sen. Mark Pryor (D-Ark.) pushed for
more transparency in terms of what cable operators are
charged for programming, so they could get a sense of
that disparity. Abdoulah said she would like to be able to
share that information, but contracts would not allow it.

CBS executive vice president of planning, policy and
government affairs Martin Franks, the network’s chief
retransmission negotiator, characterized the cable and
satellite operators pushing for Cable Act reforms as an
“unholy alliance” of distributors that are supposed to be
competitors, but have banded together to deprive broadcasters
of their due compensation.

National Association of Broadcasters president Gordon
Smith, a former senator, told the panel broadcasters were
still not getting compensated fairly for their content.

SKYROCKETING COSTS

Melinda Witmer, who is Time Warner Cable’s chief content
officer, said that the biggest problem for video customers
was “skyrocketing programming costs.”

She said her company paid almost 60% of its programming
costs, about $2 billion, to the owners of broadcast
stations. A TWC representative clarified later that she was
factoring in the costs of their co-owned cable channels,
including ones launched as part of retransmission deals.

Witmer said retransmission impasses were on the rise
and would only continue to escalate under the “broken
system.”

Kerry put the hearing in perspective, saying there remained
a gulf between the DeMint approach of sweeping
away retransmission rights and copyright licenses and
basic-tier must-buy and media ownership and those who,
like Kerry, would oppose such moves because, among other
reasons, he wants to preserve local broadcasting, something
he said was an important goal of the 1992 Act.

TAKEAWAY

A Senate hearing on review of
the Cable Act of 1992 was more
like the beginning of a conversation
on retransmission consent.

September