Blackout Refunds Fight Is Among Cable's Big Priorities: ACA Connects' Spellmeyer

A cable industry priority for the new year is opposing the FCC's proposal that requires MVPDs to refund subscribers for programming blackouts due to failed retransmission consent talks with broadcasters, ACA Connects President Grant Spellmeyer told Communications Daily. In an interview, Spellmeyer discussed his 18 months as ACA head (see 2205170043), video's declining -- but not negligible -- importance to his members, and cable's broadband equity, access and deployment (BEAD) program concerns. The following transcript was edited for length and clarity.

How’s the job going?

I'm having a ton of fun. I am getting ready to go into my third calendar year, and I couldn't be more pleased with the state of the association during the transition. We've gotten through some introductory reorganization issues, and I think things are going very well.

What was the job's draw?

I had been at US Cellular for a long time. The attraction was the opportunity to run my own job as opposed to working in a publicly traded Fortune 500 setting -- that's a world where you don't have as much flexibility to tweet or make an offhand comment to a reporter, because you've got the overhang of SEC regulations. And that's the kind of thing that gets an Elon Musk in trouble. So, this is a more entrepreneurial position. It is what I make of it over time, with the help of my very capable staff and direction of my board. So, to me, it was about the opportunity to step out in front of the camera. And to take the lead and to try to build and grow on the tremendous foundation that I was handed by Matt Polka and his 25 years of service to the association.

And it is really about the small, rural competitive roots of the membership. I started my career as a lawyer in Wisconsin representing small telephone companies, small cable companies. It was kind of an opportunity to go back in that direction.

The traditional cable business model is changing tremendously. Video is increasingly de-emphasized. Wireless is an option through NCTC. What does that mean for your membership and for having a firm grasp on industry priorities going forward?

I can't claim any credit for it, but the prior leadership, a good 10 years ago, I think, saw this coming. Maybe it's one of the few positive side effects of the broken retransmission consent structure and a broken content pricing structure is that my members have not made money on video in a long, long, long time. They were squeezed first and hardest, and nobody is going to be able to grow or survive based off of the current structure where your costs go up by a third every year or every couple of years, and you can't get any more revenue out of it. As a matter of fact, revenue’s declining because of the competition from over-the-top providers. So it's really all about broadband, about who can provide a pipe to the parts of America that the nation's largest providers don't want to go to. It really positioned a lot of my members to get out there, upgrade their plants, Wi-Fi, and that's continuing. If I have 10 top priority issues, at least eight of them are in the broadband space as opposed to in the legacy cable video base.

Is video even in that 10?

Yes, it is. Most of it surrounds retransmission consent, which remains an important issue and one that needs to be solved, but it has not sat on the front burner every day because nobody knows how to fix it in Congress, and nobody has the desire to fix it.

It doesn’t sound like there’s betting money optimism that 2024 is going to see revisions to retrans.

It does not appear to be a year where Congress is moving much of anything. That's the bottom line. I think there's a lot of member interest at the 50,000-foot level. But it's when you try to get down to how you fix it, and is Congress going to fix anything in the next 18 months?

One wonders if this is something that the marketplace solves itself, i.e., through a Cable One/Sparklight approach -- with everybody just going with a virtual MVPD.

It certainly seems to be trending in that direction. And I haven't had a lot of detailed conversations with any of my members about where they're headed, but you certainly see that trend as opposed to nobody's expanding in order to add more video customers. That causes a real problem for a number of industries, including the broadcasters, who are now trying to run their operations based off of retransmission consent revenue. I keep hoping somebody's going to wake up and go, "Maybe we better go back and look at this before the whole thing collapses."

BEAD

For your members, BEAD seems like a vast opportunity and a competitive challenge. Is it 50-50? Is it 60-40? How good news/bad news is BEAD?

It is both. I think if you made me put a number on it right now, let's call it 60-40 positive vs. negative. My other sense, though, is that it is shifting back toward either 50-50 or might go in the other direction. It's all dependent upon the remaining decisions that NTIA makes on their guidance and then what each of the 50 governors decides to do, and I really think this is potentially 50 different models. And so you've got different governors with different agendas, different timelines, depending upon whether they're up for reelection in 2024, 2026, or not running again. Whether they're Republicans, whether they're Democrats, what part of the country they're in and how much BEAD money is in that state. Everybody's going to approach it a little bit differently.

What happens [to the affordable connectivity program (ACP)] impacts it. What happens to middle-class affordability [requirements] impacts it. Prevailing wage laws. Labor issues. Supply-chain shortages. The availability of contractors. Buy American provisions. Buildout deadlines. Does the governor want to build in two years or three years or four years or six years? And so people are still optimistic, but it is shifting in the pessimistic direction.

Is it likely there are states that won’t see much ACA member participation?

I'm not ready to predict that yet. But if all of those various factors that are hanging out there -- and we probably didn't name them all, but we got most of them -- go in the wrong direction, I think you'll just see fewer members decide to bid or end up winning. [The biggest cable operators] have expressed a lot of concerns about a lot of the same things that I just talked about. At some point, does somebody go, "I'm not sure I want to sign up for all this." I don't know.

How concerned are members about the long-term sustainability of their BEAD buildouts?

Absolutely a factor. Building it is one thing, maintaining it over time is another challenge. I don't think all the rules have been set yet about how long you have to keep these networks in place and what you have to do to upgrade them. So it's a complicated business analysis to try to figure out where to begin. What's inflation going to do over the next three years? For so long, this business operated in a vacuum with regard to interest rates. Money was cheap. You get an inflation effect, you get a wages effect, which is probably more substantial than inflation, especially when it comes to hiring certain talented construction crews. BEAD money is going to go a long way, but I don't know if it gets everything done.

You’re not 100% confident on 100% broadband access once all is said and done?

If NTIA and the governors are not too aggressive in loading this up with too many ticking time bombs, I think we're going to get close. It's going to vary by state -- some states are projected to have a little excess money and some are projected to be a little short.

When talking with members, is there much concern about the ACP? Is there much exposure to ACP and thus worries about loss of subscribers?

Something in the vicinity of three quarters of our members signed up for the ACP and rolled it out and have, to one degree or another, ACP customers, and there is worry as a result of that. I don't think my members' businesses are being funded by ACP. There's not a doomsday reliance on ACP membership, but there are 20 million customers out there that are on it. And at some point, the FCC is going to have to start to give guidance as to how a wind-down takes place.

In the New Year

What are the 2024 priorities?

2024 priorities will be dominated by BEAD implementation and net neutrality. There's a lot of troubling stuff in this digital discrimination item. The [NPRM on programming blackouts refunds] (see 2310110075) is a top priority item. There are issues related to refunds that are complicated and how you do it and the confidentiality clauses in contracts. We would love to see the FCC strike down confidentiality clauses and programming content contracts but don't know that they're going to do that, and I don't know how they're going to work their way through this. What's three days of the Tennis Channel worth? And how do you give that back without violating confidential pricing clauses in what are supposed to be commercial contracts? And then what happens three weeks later -- when you resolve the blackout, the price is going up and then everybody figures out exactly how much it just went up? Because you go back to the customer and say, "You no longer get your 33 cent credit."

I just don't think [the FCC has] thought it through. We generally don't block programming. It's the programmer who says, "Take my programming down and stop sending it.’ And so I don't get it: I don't get why we’re the brunt of an otherwise understandable frustration.

Broadband label implementation is a 2024 priority. I think that's the other big one. And then I obviously spent a lot of time working on building and maintaining and growing strong congressional relationships. What Congress looks like in 2024 is anybody's guess, given an overhang of the House and the Senate and the presidential election.

ACA has an obvious point of view in the Title II and digital discrimination proceedings. Are you already preparing for litigation?

We have had conversations about litigation. I'm not ready to call it a foregone conclusion that all is lost.