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Independent Show: Small Ops Say 'Dropping Channels Works'

7/24/2012 4:10 PM Eastern

Small operators have to develop a "thick skin and iron will" to drop the channels that demand exorbitant rate increases.

That's one strategy advocated on a panel at the Independent Show in Orlando for small- and mid-sized cable operators. Although many small MSOs are fearful about dropping a major network, panelists said it's a tactic that at certain times makes sense to deploy. 
On the panel devoted to "Programming Reform: What's Next As D.C. Starts to Move," John Higginbotham, superintendent for the Franklin Plant Board, a municipal utility serving 17,000 subs in central Kentucky, said the company has had several "blackouts" of channels during retransmission-consent disputes. The longest was five months in 2005; in 2008 the utility dropped three networks, one for 12 days.
"Our company took a 4,500% increase on the retransmission fee for the in-market affiliate, he said. "It's crazy."
"You gotta have thick skin and iron will and take the beatdown from the customer, said Higginbotham. "I know it's tough to say," he added. "Dropping has worked. You don't want to do it, but sometimes you have to."
Other panelists seemed to agree - as long as consumers are "educated" about how the channels are pulled in retransmission scraps or normal network carriage fights. After the DirecTV-Viacom dispute, "we're seeing that consumers understand the perspective of the distributor more," said Tonya Rutherford, assistant general counsel for business and legal affairs at Verizon. " Consumers get it."
"Content is king, but not all content is must see," said John Bergmayer, senior staff attorney for Public Knowledge. ""And you can't just expect more and more every year because distributors will ultimately start to look elsewhere."
Almost everyone agreed that the economy's impact on viewers will have an impact on customer's ability to withstand big rate increases passed on from programming hikes.
Likewise, this consumer frustration will be the primary driver of relief in many ways - in the form of an overhaul of the current Telecom Act.
Indeed, the panel opened with a video montage of legislators in various hearings complaining about retransmission-consent blackouts, the effects on consumers and the limited scope of FCC authority. All of the panelists agreed that Congress is likely to act on a broad telecom rewrite by next year.
Another promising possible solution to retransmission disputes could be technological. Aereo, the upstart broadcast TV service that is currently in a legal fight with broadcasters, seemed to be more of a solution for small cable operators.
"If Aereo can do this lawfully, and give subscribers an option to receive the over the air channel without going through the entire retranmission process, why couldn't a cable operator set up the same technological platform at the very least supply the subscriber at home their own antenna to reciveve free over the air TV as God and Congress intended?" asked Barbara Esbin, senior counsel at Cinnamon Mueller, a law firm helping small operators.
"Its an extremely promising example of increasing consumer choice, decreasing costs to consumers and making the provision of access to broadcast signals more frictionless, like it was in the beginning."

September