Federal Rules Give Broadcasters Unrestrained Power to Extort Unreasonable Fees from Operators; Customers Pay Price
PITTSBURGH, September 18, 2008 – In the second fiscalquarter of 2008, broadcasters announced record-breaking retransmission consent revenue,validating the concerns of small and medium-sized cable operators who have toldCongress and the FCC that the retransmission consent market is broken, causingconsumer rates to increase.
In the second quarter of fiscal year 2008, Sinclair reporteda 27-percent increase in retransmission consent revenue to $18.7 millioncompared to the second quarter of 2007. Over the same period of time, Belo reported a 36-percent increase to$7.6 million; Hearst-Argyle a 26-percent increase to $6.8 million; and LIN TV a97-percent increase to $6.7 million. Since2005, broadcasters have increased revenues generated from retransmissionconsent by about 75 percent.
“The numbers are in, and once again cable customers lose asbroadcasters squeeze every last penny out of operators – simply becauseoutdated federal rules allow them to do so,” stated MatthewM. Polka, ACA president and CEO. “With thousands of retransmission consentcontracts set to expire in the coming months, we expect broadcasters to continueto exploit their government-enhanced market power, which will very likely raiseprices for pay television customers across the country next year.”
Federal retransmission consent and network non-duplication rulesgive broadcasters unrestrained leverage to demand unfair rates, terms andconditions for retransmission consent, particularly from small and medium-sizedoperators. Broadcasters often discriminateagainst smaller operators by unjustifiably demanding higher per subscriber feesthan other operators in the same market.
“Broadcasters are increasingly taking advantage of theopportunity to use customers of cable operators as ATM machines,” Polkacontinued. “ACA members report that manybroadcasters are exponentially increasing per subscriber fees without care orconcern as to how it will impact consumer bills.
“Retransmission consent is a government-created scheme thatmust be addressed by the government for the sake of consumers,” Polka said. “The FCC has been rightly working to addressproblems in the wholesale programming and broadcast market, and we encouragethe Commission to put an end to the extortionist practices of broadcasters thisyear.”
William P. Rogerson, former FCC chief economist andprofessor of economics at Northwestern University, finds no economic rationaleor discernable public policy support for retransmission consent pricediscrimination against smaller cable distributors; rather, the lack ofnegotiating strength and bargaining power of the small and medium-sized cableoperator is exploited by broadcasters abusing their government-granted abilityto unfairly demand higher prices.
“There is considerable evidence that broadcasters do, infact, engage in extensive amounts of price discrimination,” states Dr. Rogersonin a Feb. 2008 FCC filing. “The main economic cause of price discrimination inretransmission consent agreements is simply that small and medium-sized cableoperators are in a considerably worse bargaining position than their largerbrethren.”
ACA has filed comments with the Federal CommunicationsCommission (FCC) as part of its ongoing Further Notice of Proposed Rulemaking(MB 07-198) regarding revisions to the Commission’s program access andretransmission consent rules, urging the Commission to make moderate changes toexisting rules and regulations.
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About the American Cable Association
Based in Pittsburgh, the American Cable Association is atrade organization representing 1,100 smaller and medium-sized, independentcable companies that provide broadband services for more than 7 million cablesubscribers primarily located in rural and smaller suburban markets across America.Through active participation in theregulatory and legislative process in Washington,D.C., ACA’s members work togetherto advance the interests of their customers and ensure the futurecompetitiveness and viability of their business. For more information, visitwww.americancable.org.