Senate Panel Stumps for Increased Competition, Choice in Video Marketplace

Senate Commerce Committee members of both parties said there’s a battle coming as they consider how to rewrite or possibly purge some of the 1992 Cable Act. There was a general accord Tuesday during a committee hearing that consumers need more choice and control of the video they receive, but members disagreed over how to achieve that. Retransmission consent disputes were of particular concern for members, who said they had received calls from their constituents about the recent retrans blackouts.

Sen. Jim DeMint, R-S.C., promoted his Next Generation Television Marketplace Act as a means to offer more competition and choice to consumers. “The ‘92 Act is obsolete and video compulsory licensing is no longer needed,” he said. DeMint posited that S-2008 would “withdraw government meddling” from the video industry by removing compulsory licenses and retrans rights. By removing regulations, Congress would allow unencumbered parties to negotiate contracts, he said. “What we need is a simpler rule book for all market participants. ... We should be creating a deregulatory parity in the marketplace.”

Sen. John Kerry, D-Mass., said there’s a “real divide” between DeMint’s proposal and his own beliefs. “I want to personally preserve local broadcasting,” and “moderate tweaks” to the retrans process would suffice, Kerry said. “I would not support radical proposals to eliminate retransmission consent rights or must-carry requirements altogether. But I also want to shield consumers from unfair treatment or from being used as pawns in negotiations.” Kerry urged industry members to step up and “construct an alternative” to the disruption of service during negotiations. “And I urge the FCC to complete its pending notice of proposed rule making on retransmission consent,” he said. Some cable operators that want changes to retrans rules have also sought a retrans order (CD July 24 p26).

Committee Chairman Jay Rockefeller, D-W.Va., is most concerned about consumers, not the battles between multichannel video programming distributors and broadcasters, he told us. “I know many in the industry will argue that the Cable Act achieved its goals,” he told the hearing. “I will not go along with that argument. I highly doubt many consumers would agree. They feel like they pay too much and have very little choice in picking the content they receive."

"The market isn’t working,” Rockefeller said. “Real competition should be bringing rates down. It is my general impression that [most of the witnesses'] profit margins are very, very high, maybe 30-40 percent each year.” He said retrans is only “part of the puzzle” and consumers should receive refunds when they lose channels due to corporate disputes.

Sen. Tom Udall, D-N.M., asked witnesses what would happen if the committee decided to abolish must-carry rules. NAB CEO Gordon Smith said media diversity and localism would suffer. “You wouldn’t have Univision today, you wouldn’t have Fox today, you might like that Mr. Chairman, but these great networks developed because of must-carry,” he said. “Must-carry is important to many small rural communities ... and if you want to continue to encourage localism must-carry is important.” Eliminating the “must-carry” rules for commercial TV stations would be a “fatal” blow to many Christian outlets, said National Religious Broadcasters CEO Frank Wright in a separate letter sent to sponsors Monday (http://xrl.us/bnh2hc). He urged sponsors of S-2008, whose House companion is HR-3675, to consider the unintended consequences of the bill.

Ranking Member Kay Bailey Hutchison, R-Texas, has “quickly retreated” from her position as a strong proponent of the newspaper/broadcast cross-ownership ban, she said. “It’s obsolete now and I am 180 degrees different from where I was,” she said. “We need legitimate news organizations to be able to function and have a voice, because there is such a proliferation of voices with no capability for in-depth reporting and in some cases ethical standards.” Smith said NAB supports a relaxation of the of the cross-ownership rules, as did Preston Padden, a former broadcast and cable executive who’s now a fellow at the University of Colorado’s Silicon Flatirons Center who urged members to provide “some relief from those rules” to help journalism outlets to survive.

Sen. Mark Pryor, D-Ark., said he’s not pleased with the lack of transparency in the licensing agreements between broadcasters and cable companies. Wide Open West CEO Colleen Abdoulah, American Cable Association chairman said “right on” and agreed with Pryor that greater transparency is needed. “We can’t tell you what we pay,” she said. “The programming agreements we make do not allow us."

Members of the committee should “look before they leap” and consider the unintended consequences of removing retrans consent, said CBS Executive Vice President Martin Franks. Otherwise, many smaller players including smaller cable operators will be “squeezed out” of business, he said. The only way to level the playing field is to repeal the cable and satellite compulsory licenses, Padden said as expected (CD July 24 p1).

Small cable businesses are ‘already getting squeezed out,” Abdoulah said. “Smaller operators simply do not have the leverage to negotiate for broadcast content,” she said. “Consumers are saying ‘give me choice, give me what I want when I want it’ and we can’t do that due to the rules today.” The consumer “always loses” in retrans negotiations, Mark Cooper, Consumer Federation of America director of research, said as expected (CD July 17 p4). “The original sin here are exclusive broadcast licenses that are a constitutional affront to the First Amendment.”