The long fight to settle must-carry

After half a decade sparring in the back rooms of the FCC, the debate over cable's obligation to carry local broadcasters' digital signals has been pushed into the ring of big-time politics. Trent Lott, the top Republican in the Senate, has called on agency Chairman Michael Powell to decide the extent of big cable systems' obligation to carry local TV stations' digital signals. If attention to a debate long removed from the minds of top policymakers wasn't surprise enough, the Mississippi lawmaker went further by giving his strong endorsement to broadcasters' latest demand that cable systems around the country be required to carry every free channel or service that local stations can shoehorn into their 6 MHz of digital spectrum.

But broadcasters shouldn't take the champagne off the ice yet. Now that the debate has moved beyond the FCC technocrats to senior members of Congress, the outcome is susceptible to political horse-trading.

Lott's interest in must-carry is no doubt prompted by religious broadcasters and maverick broadcaster Bud Paxson, who each provide Christian and family-oriented programming reaching a critical GOP constituency. He's a significant ally: Lott is the highest-ranking member on Capitol Hill to call for broad digital-carriage rights.

Without carriage rights for local and independent broadcasters, "the constructive and positive programming which they offer will be highly diluted as a percentage of total channels available on digital cable systems," wrote Lott, joined by Sen. Larry Craig (R-Idaho), chairman of the Senate GOP policy committee, in an Oct. 11 letter to Powell.

The senators asked for Powell's "thoughts" on multicast carriage and urged him to suggest legislative or regulatory changes he needs to ensure that cable companies will be required to carry every program and service that stations offer for free over their digital spectrum—be it high-definition TV or multicasts of up to six channels.

Beyond the solicitation of Powell's thoughts was Senate Minority Leader Lott's signal for the FCC chairman to get moving on digital-carriage rules, which have been mired at the commission since 2001.

Broadcasters, perhaps most of all, have been frustrated with Powell's unwillingness to bring DTV-carriage rules to a vote.

The problem: Since August, the FCC has been locked in a 2-2 tie, pitting Powell and Kathleen Abernathy against Michael Copps and Kevin Martin over rules that would settle many digital-carriage disputes.

At the heart of their dispute, say industry sources, Copps and Martin are ready to declare that broadcasters can demand carriage of multiple video streams, while Powell and Abernathy want additional public comment on the constitutionality of that.

Lott's request for suggested law changes is seen as an offer that Congress will take the lead if need be, since the long and tortuous judicial history of the FCC's cable-carriage rules (see below) clearly has given Congress more leverage to impose obligations.

Lott's offer also may provide the political cover Powell needs to move forward without the added step of new public comment.

Already, House Commerce Committee Chairman Billy Tauzin (R-La.) has said cable likely must carry more than the traditional single broadcast channel if the transition to DTV is to succeed. Senate Commerce Committee Chairman Fritz Hollings (D-S.C.) likely supports the idea, too, given that he's a Copps mentor and former boss.

Lawmakers' endorsements have emboldened Powell to act on other controversial DTV measures. Support from Hollings, Tauzin and John Dingell (D-Mich.) persuaded Powell to impose DTV-receiver requirements on TV set makers despite manufacturers' protests that the move was illegal. (Last week, the Consumer Electronics Association filed suit against the rules.)

Still, last week, Powell did not appear ready to bring new carriage rules to a vote.

Lott's request mirrored the arguments of the National Association of Broadcasters, which say that, in an era when media businesses depend on several revenue streams, multicasts must be received by the 70% of U.S. households subscribing to cable.

"The wave of the future is having more than one revenue source," says Paxson, whose collection of UHF home shopping stations became a viable programming network after the Supreme Court upheld the current analog must-carry regime in 1996. He derides Powell's desire for public comment as "a waste of time." The losing industry will go to court however the FCC rules, he says, so why hash out a question that will end up in judges' laps anyway?

The cable industry remains adamantly opposed to any change from the FCC's 2001 tentative interpretation of the 1992 cable act, which stipulates that cable systems must carry a local TV station's "primary" video signal. Under then-Chairman William Kennard, the FCC ruled that cable franchises have no duty other than to the single, traditional channel of a local broadcaster.

"The commission was right in 2001: 'Primary' means one," says NCTA counsel Daniel Brenner.

NCTA Chairman Michael Willner agrees: "Cable operators and consumers should not be required to forfeit valuable channel capacity and new services to help broadcasters launch undefined businesses."

Despite the endorsement of some top lawmakers, a multiple-carriage mandate is highly controversial among the rank and file of the House Commerce Committee. "I don't want all those channels," Rep. Anna Eschoo (D-Calif.) declared at a hearing on Tauzin's draft DTV legislation last month.

But cable's task facing down multiple-carriage rules is much tougher compared with its successful effort opposing dual analog/digital must-carry over the past six years. Not only are policymakers increasingly convinced that broadcasters must be able to offer more than one channel if they are to survive, but the broadcast industry is forging a much more united lobbying front.

During NAB's unsuccessful bid to win dual must-carry, the networks stayed out of the fight and, behind the scenes, told regulators their power to negotiate favorable retrans deals with cable would win them all the dual carriage they need. Nor did it help that Paxson, whose wealth is due to analog must-carry rules, wasn't engaged either.

Now Pax TV and two major networks—NBC and ABC—are on board (CBS and Fox, whose parent companies have more-significant cable-programming holdings, have stayed out of the must-carry fight).

"It is essential that digital must-carry encompass carriage of the entirety of the broadcast signal," NBC Chairman Robert Wright told the DTV hearing last month. "Virtually every business model for broadcaster digital envisions some multicasting." ABC made a similar point in FCC filings.

Broadcasters are pleased that other provisions expected in the FCC plan would:

• Allow stations to choose either digital or analog carriage, even when a station still offers an analog channel.
• Forbid compression techniques that diminish picture quality, such as reducing HDTV resolution from 1080i to 780p.
• Require cable systems to carry broadcast digital channels on the same tier as cable digital channels' during the transition and on basic-cable tiers or lowest-priced packages post-transition.

There has been little open debate over tiering placement, but the issue is likely to be another major fight after basic carriage rights are established. "If the government requires us to invest in and carry 6 MHz in digital, cable systems ought not be allowed to slice and dice our product," said Thomas Draper, owner of WBOC-TV Salisbury, Md. He is willing to compromise on tiering for data and perhaps other free ancillary services but says a station's traditional programming streams must be on the same tier and contiguous on a program guide.

Because the debate has shifted from transitional rules to a permanent framework, the cable industry and broadcast networks no longer have as much common ground.

While the shift from analog to digital is under way, cable systems that have expanded capacity for their digital tiers are thrilled to have the broadcast nets offering digital, which today, for the most part, means HDTV that they can put on high-priced premium tiers. Since few people have HD sets today, the nets don't mind that digital is carried to only a few customers.

But when the market goes all digital in 2006, 2010 or 2015 (make your best guess), broadcast networks will want every viewer to have all their digital offerings.

Cable, on the other hand, wants flexibility to decide which additional broadcast channels they carry and whether they are placed on the basic tier and in the lowest-priced packages or are reserved for more-lucrative premium packages.

"The assumption is that every broadcaster will have multicast offerings carried on the basic tier," says one industry lobbyist. "The only way to drive exposure to digital and speed the transition is to put the onus on cable to make it available."

So far, the main broadcast trade groups have left the tier-placement debate for later. "It's not ripe yet," said David Donovan, president of DTV trade group Association for Maximum Service Television.

If the FCC does impose a multiple-carriage mandate, will cable continue its fight? After all, broadcasters note that compression techniques will allow their multiple channels to be squeezed down to occupy only 3 MHz of cable capacity, half the space required for today's analog signals.

With lawmakers as divided as the industries, many Capitol Hill sources predict the battle over must-carry will continue in the digital age. Rep. Edward Markey (D-Mass.), a co-author of the current analog rules, noted that the law mandating DTV has passed its fifth birthday with no resolution of carriage rights and other critical rules. "I think we might have 20th and 25th anniversary celebrations on these issues," he wryly told colleagues. "It's kind of reassuring."