According to recent negotiation debacles based on current Retransmission Consent Rules, regulations adopted in 1997 by the FCC in a (5-4) Supreme Court Decision, entitling broadcasters to negotiate terms of carriage from Pay TV Providers have gone dismally awry. As designed, broadcasters could elect negotiated carriage terms rather than just Must-Carry, which required operators to carry their signal in local markets for free. While the FCC bowed to lobbying efforts by the NAB, intending to force market equity, they actually produced the opposite. That is, consent rules were formed to curb the Cable Industry’s dominance in the video market, therefore moving to equalize a market inequity. Fast forward to 2011, those very rules seem to be producing the opposite effect with outdated regulations left untouched in a fast changing video market.
These rules are now being used to extract hefty fees and extraneous channel carriage from an already burdensome retail price structured by pay TV operators trying to hold down costs perceived by consumers to be too high. Unless operators are of the size of a Comcast or at least a national provider; the cost of carrying local, or historically and significantly viewed distant stations, can be financially quite painful, not only to the smaller operator, but the consumer. The alternative could result in a local station, or group of national channels being dropped by a pay TV operator. As always, this puts the consumer in the middle with limited choices, other than installing an antenna to receive free over-the-air signals or going to a satellite competitor. See (Retransmission consent fees: Broadcasters want more from everyone)
The video market is much more complicated than it was back in 1997, when cable was the most dominate player with little or no competition. Times have changed, and so has the landscape with increased competition from satellite delivered operators, (DBS), and vertically integrated broadcasters and cable operators, some owning both broadcasting and cable programming. This makes for a more complex market of players which can, and now do, hold retransmission consent negotiations hostage to subsidize lagging ad revenues, and therefore financial bottom-lines. In addition, those same negotiations are further used in channel-groupings in a take-all or none scenario in which pay TV operators economically cannot refuse. See (FCC Seeks Feedback on Retransmission Rules)
Negotiations have become so heated and financially important, both sides of the economic issue have begun using consumers as hostages in the negotiating process: threatening to pull the plug on important programming at a time when consumers are most vulnerable to “blackouts”, and likely to create backlash, while both parties blame the other for insisting on unreasonable terms. Unfortunately, broadcasters have come to rely financially on the additional revenues that current retransmission regulations afford while some would not make a profit without them. See (ACA To FCC: Outlaw Broadcaster Price-Fixing In Retransmission Consent)
It’s time for the FCC to again revisit rules that were designed to right a perceived market wrong, and extract a solution from the tangled web.
- Extracting the channel-grouping affect from negotiations, that is, cable channels would be negotiated separately from local broadcast channels
- Requiring negotiations on a per market basis for carriage of local channels in each market, and excluding nationally own stations from the mix
- Eliminate multi-station collusion where owners ban together to set up pay TV operator negotiations to coincide with each entities contract end-date, thereby upping-the-anti to control an outcome
This is not an issue that will solve itself. It will take a concerted effort by the FCC, NAB, and ACA all coming together to iron-out differences and settling on a fair and equitable solution for all concerned, including the consumer. A subsidy to any industry allowed to prey on another for its existence will never create market equities which is healthy for competition.
Founder of Broadband Convergent, a Broadband-Mobile-Cable-Wireless-Telecom market website focused on highlighting industry news and strategic issues within technology arenas. Highly researched and experienced insights and trends both inform and enlighten readers on current industry convergence of Broadband-Cable-Mobile-Wireless and Telecom Sectors.
