Discriminatory Retransmission Consent Fees, Tiering Requirements and Closed Internet Business Models All Drive Up The Price Of Cable And Broadband and Limit Consumer Choice
PITTSBURGH, September 1, 2009 – The American Cable Association urged the Federal Communications Commission to use it authority to prevent broadcasters and media conglomerates with ownership stakes in cable networks from exploiting their market power against the video and broadband customers of small cable companies who reside in rural areas and other economically challenging regions.
“Based on evidence supplied by the ACA and others, the FCC has the data and information it needs to see that customers of small, independent cable providers continue to be the victims of price gouging and similar market abuses perpetrated by broadcasters and media giants who have no regrets squeezing profits from the powerless,” ACA President and CEO Matthew M. Polka said.
ACA expressed its concerns about the most crass actions taken by powerful media players in reply comments filed Aug. 28 in connection with the FCC’s annual assessment of competition in the delivery of video programming, also known as the cable competition report.
“The FCC needs to fix the shattered retransmission consent regime, stop programmers from demanding carriage within the most popular programming packages, and discipline Web-based content providers that block consumers’ access to their services if the consumers’ broadband access provider has refused to pay per-subscriber license fees to the content owners,” Polka added.
In its comments, ACA compared survey results with press releases and filings with the U.S. Securities and Exchange Commission to reveal the extent to which broadcasters effectively coerce small cable providers into paying much higher retransmission consent fees than larger pay-TV competitors.
ACA highlighted the following double- and triple-digital retransmission consent revenue gains of several publicly traded broadcasters in the second quarter (April – June) 2009:
- Gray Television, Inc.: Retransmission consent revenue up 394%.
- Journal Communications, Inc.: Retransmission consent revenue up 150%.
- Meredith Corp.: Retransmission consent revenue up 75%.
- Nexstar Broadcasting Group: Retransmission consent revenue up 68%.
- LIN TV Corp.: Retransmission consent revenue up 67%.
ACA pointed out that small cable providers end up paying even more because small providers have a de minimis share of the market and can’t afford to alienate consumers who expect to see broadcast content on their cable system. Broadcasters also get away with demanding high carriage fees from the smallest cable providers in the market because they know that lack of carriage won’t affect their bottom line nearly as much as would denial of carriage by the market’s largest pay-TV providers.
ACA noted that SNL Kagan, a respected analyst of cable market trends, projects that retransmission consent revenue will reach $1.2 billion by 2011, more than double the $500 million paid in 2008.
ACA’s comments also pointed out that media giants insist that small cable operators provide their networks to all or nearly all subscribers, regardless of whether consumers desire the content.
“Tiering requirements drive up retail cable rates by forcing consumers to buy programming they don’t want to watch. It also deprives small cable operators of their ability to offer a much wider variety of programming packages tailored to a local community’s interests,” Polka said.
ACA also warned that companies are experimenting with closed Internet business models that will only serve to drive up the cost of broadband. For example, consumers can’t access ESPN360.com, owned by the Walt Disney Co., unless the broadband access provider pays Disney a monthly fee based on the provider’s total number of broadband subscribers.
“Disney’s refusal to sell ESPN360 directly to consumers will raise the price of broadband and punish the pocketbooks of casual Web surfers who have no interest whatsoever in watching beach volleyball on a computer screen,” Polka said.
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About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing more than 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit https://acaconnects.org/