By Matthew M. Polka
With Washington, D.C., divided on a number key policy fronts, now is perhaps the perfect time for Congress to focus on an issue that has bipartisan support: Overhauling the 1992 Cable Act and scrapping many badly outdated video regulations.
A great place to start is with the requirement called the basic tier buy-through. This regulation mandates that cable subscribers buy all local TV stations prior to accessing any other video service offered by their cable company. A real-world example shows how this particular cable statute distorts the market and drives up the price of cable by government fiat.
Say you want to be a cable subscriber but all you want in terms of broadcasting is the area’s CBS station. Your cable company will say it can’t do so either because of federal law, or because CBS won’t allow it.
Call back the same cable company in your role as one of its broadband Internet subscribers and ask the same question: Will you sell me CBS a la carte? Answer: Not a problem. How can that be?
Last October, CBS launched a service called CBS All Access, which streams CBS owned-and-operated TV stations over the Internet for $5.99 a month. Just so you know: No law or regulation will make you buy another local station to become a paying CBS All Access customer.
Obviously, this example highlights that federal law is embarrassingly out of touch and needs to catch up with the market. Enactment of an idea called Local Choice would go far in that direction. For starters, it would topple government-imposed TV station buy-through barriers and would substitute government-dictated outcomes with free-market solutions rooted in a preference for regulatory parity.
Local Choice was the brainchild of Senate Commerce Committee Chairman John Thune, R-S.D., and then-Sen. Jay Rockefeller, D-W.Va. In good faith, the two lawmakers circulated their bipartisan proposal last year in response to their frustration with the Cable Act’s broken retransmission consent regime, a cable-operator-to-TV-station payment scheme that is sending monthly cable bills soaring and fueling a record number of signal blackouts initiated by local TV station owners holding out for more money.
At its core, the Thune-Rockefeller proposal called for cable operators to make every local TV station available to their subscribers and for TV stations to set the monthly a la carte price, with 100 percent of the revenue retained by the TV stations. Cable customers who opted not to pay the station’s monthly fee would no longer have access to that station on the cable system.
Local Choice has so much going for it: It is far more free market in its design than retransmission consent; it recognizes that TV stations are already a la carte with an antenna; it retreats from the congressionally decreed local TV station bundle template; it is an effective mechanism for determining real consumer demand for local TV stations; and, lastly, it ends for good TV station blackouts that are not the conscious choice of the cable subscriber.
An alternative approach to Local Choice would not involve a new law abolishing retransmission consent. Instead, the Federal Communications Commission could use its existing authority to hold that TV signal blackouts — regardless of who initiated them — would violate the current legal requirement for TV stations and cable operators to negotiate in good faith.
Under this proposal, the FCC could order continued signal carriage pursuant to terms in the most recently expired contract while at the same time sending both the cable operator and the TV station into binding arbitration. Although this process might slow the soaring cost of broadcaster retransmission consent fees, it would eliminate blackouts that TV stations are fond of staging, or like threatening to stage, just moments before the start of marquee events like the World Series, the Super Bowl, March Madness or the Academy Awards.
A few days ago, the leader of the National Association of Broadcasters issued a warning to those in the cable industry who support Local Choice. His message: If you keep it up, TV stations will retaliate by lobbying Congress to impose a la carte on cable networks.
For many years, the independent cable community has called on Congress and the FCC to provide consumers with more choice and options. So instead of viewing the NAB chief’s words as a political threat, independent cable operators that embrace regulatory parity certainly hope NAB is extending an olive branch inviting stakeholders to help fashion new policies based on the needs of consumers, not on the desires of special interests clinging to archaic regulatory advantages awarded when the Betamax was cutting-edge technology.
The world is changing faster than most people can track. Consumers are flocking to new platforms inaugurated by innovators like Netflix that provide a variety of options not available on traditional pay-TV platforms. HBO is catching up with the rollout of HBO NOW, a $15-a-month broadband service modeled after CBS All Access. Dish Network’s $20-a-month Sling TV is a broadband programming package that includes sports giant ESPN.
In a volatile digital marketplace, ignoring the customer can lead to swift punishment. Viacom, a major cable programmer that distributes Nickelodeon and Comedy Central, just recorded a massive $785 million pretax charge to reflect a sharp decline in advertising tied to viewer migration to Internet-based services. This news came just four months after Viacom announced “record results for the fiscal year ended September 30, 2014.”
The lesson to draw from Viacom is that consumers empowered by broadband Internet access will give their business to those who treat them the best. But cable laws that require the purchase of every TV station in order to get any TV station — when CBS All Access is just a click away — are an invitation to cord cutting, setting the stage for more Viacom-like upheavals that inflict pain on cable operators and TV stations alike.
Although it seems NAB’s leader isn’t ready to talk, I do hope he might be willing to listen.
Matthew M. Polka is president and CEO, American Cable Association
The 114th: CQ Roll Call's Guide to the New Congress
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