Big Voice for Small Operators

ACA president Matt Polka discusses ACA’s successes, programming challenges and why cable needs to be a constructive part of the violence conversation

The American Cable Association, which represents small and mid-sized cable operators, turns 20 this year. As it prepares for its annual conference in Washington this week, ACA President Matt Polka talked with B&C about the association's successes, programming challenges, why cable needs to be a constructive part of the violence conversation and much more. An edited transcript follows.

Why did the cable industry need an ACA back in 1993?
Because there wasn't a voice for the unique issues faced by independent operators. We learned out of the 1992 Cable Act that there are big differences between large operators and smaller independent ones. That was a need shown to be necessary back in 1992 and as the chasm between larger and smaller increases in 2013, that voice is needed more than ever.

What do you see as some of your biggest successes?
For one, longevity. Despite the predictions of many before us, we're still here and we are still going strong. That has a lot to do with our members' success at providing advanced services in smaller markets and what we have achieved in fighting for them and raising their profile. I can look at a number of things. There are myriad FCC rulemakings where we have helped lessen the burden on smaller operators. I can look at the Comcast/NBCU merger where we were successful in getting conditions put on that merger. Stopping the DISH/DirecTV merger. The 1996 Act where we fought hard for deregulation of smaller operators, and before that with the FCC small system rules. Then there were conditions on the Fox/News Corp. merger, and more recently, issues of the 1992 Act like retransmission consent and reform are now issues that Congress is talking about. There is no guarantee on what will happen, but we are going to keep pressing.

You mentioned DirecTV. You said last July during the Viacom/DirecTV blackout that "The pay TV industry is trapped in a perpetual state of crisis with no end in sight. How do you fix it?
It really is broken. Whether you are talking about retransmission consent, sports programming or cable programming.

Let's talk about each, starting with retrans. Assuming it is broken, which broadcasters don't concede, how do you fix it?
Congress can intervene to update what are clearly outdated rules, either as part of current legislative efforts like reauthorization of the Satellite Television Extension and Localism Act [STELA] or standalone legislation like Steve Scalise's Next Generation TV Marketplace Act. The rules were designed in a galaxy far, far away, a time that doesn't exist today.

So you don't see the FCC doing anything on its own dime about this, right?
I don't know that. The FCC has in front of it two rulemakings where it could chose to do something, whether in the retransmission consent rulemaking or probably more appropriately the media-ownership rulemaking. Many of the issues we brought up with the FCC are teed up in both.

The FCC certainly can act in both of those without direction from Congress if it wants to do so, but ultimately, we think that what is necessary are fixes from Congress.

Why shouldn't broadcasters be able to negotiate for stations owned by others that they manage or sell ads for?
In every other context where two companies are not commonly owned and come together to jointly negotiate for a price, it is a violation of the antitrust laws, and frankly, the broadcasters know that they are in essence doing an end-around of the FCC's duopoly rules by their sham of joint marketing agreements or shared services agreements. It is one thing if they want to share advertising or marketing departments or even if they want to share a helicopter. But it is when they come together as non-commonly-owned entities and one entity takes the lead in negotiating for two must-have programming channels that the price goes up as a result of what is really price fixing. We clearly think this is a violation of the FCC's rules that prohibit one station from exercising control over another licensee. The FCC has more than an ample record in the retrans proceeding and the ownership proceeding to stop this.

Does the FCC have any stomach for this?
In terms of media ownership I know ours is just one of many issues, but we hope that they will. We certainly haven't given up. A couple of weeks ago, 25 of our CEOs filed a letter at the FCC highlighting the harm in their markets. This was not without some risk since our members have to negotiate with these broadcasters, but we are dedicated to getting this answered either at the FCC or even in Congress. We are talking to members about 1992 Act reform and banning coordinated negotiations. It is part of what we are asking for and we will be dedicated whether it takes us another 20 years.

And on sports programming and the bundling issue that is getting so much attention these days?
To be honest with you, I don't think anyone has a real solution at this point because we know that sports and cable's bundled programmers are going to fight to the death to maintain their bundle. They will not allow anything to break up the grossly increasing size and cost of their bundle, particularly when you look at what they are paying for sports rights to the leagues and how they are continuing to bundle their marquee programming with other, affiliated programming that is far less watched.

I think ultimately the fix for that is the disaggregation of video as a result of technological innovation. That is where our members' broadband plan comes into play. Consumers are getting much more involved in watching video online on multiple devices. They like it. We as cable operators are looking at how we can use our broadband plant to give our customers more opportunities. I think with the growth and development of that plant, we will be able to give our consumers more choices.

You say technology is the fix. So you don't have much hope for the Cablevision antitrust suit against Viacom?
It is really hard to say. That will depend on the nature of their claim and complaint. At the very least, what Cablevision has done, and I give them credit for their courage to do this, is to really bring light through the courts to what is a significant problem in today's market, with the size and cost of the bundle consumers are being forced to pay for to get two, or three, or four key programming channels.

I don't know what their success will be, but I am encouraged that more [multichannel video programming distributors] are taking the fight to the programmers, whether it is ACA or DirecTV or Cablevision or Dish or others who have focused on the size and cost of the bundle and how it is harming consumers and cable operators.

So, out of traditional video, broadband and phone, which do you think will be the biggest part of your business going forward?
If you ask me, it is all about the broadband network. That is what our members are building. That is what our customers are demanding. Consumers want more speed and capacity. It is going to be our job as cable operators to provide that.

We see our future as an association to be focused on broadband and broadband policy and enabling our members to be able to provide more competitive broadband service in their markets.

What are your concerns about the transition to Internet Protocol delivery of content and how the FCC is handling that?
From a broadband perspective, I am most concerned about a couple of things. First is their ability to manage their networks. The demand is going to increase as I said earlier. Our members will have to continue to build and upgrade. Some in Congress and the FCC have talked about restricting the ability of our members to manage their networks via usage-based billing or reasonable data caps. That is not going to work.

My other worry, and we have seen this with Disney's rollout of ESPN 360 [now ESPN 3], is the migration of the subscriber programming model to online Internet video. That would enormously increase the cost of broadband because in addition to the cost of the network, you would have the cost of programming. 

We certainly will be very concerned if programmers try to monetize their video service on the Internet as they have done on the cable platform.

I don't think the programmers have figured it out yet and there would certainly be an enormous consumer backlash if they tried to do this, which is why you haven't seen more of it today. But it is certainly something we will be on the watch for.

How long can the FCC wait to decide the definition of an MVPD in terms of the rights and responsibilities you put on them in competition to cable operators who already have those?
As far as the over-the-top providers and their classification as an MVPD, we've faced numerous competitors since we started back in 1993. One more is not really going to make that much of a difference. And for over-the-top providers, the definition is a two-edged sword. They don't have the program access rules. But they also don't have the retransmission consent obligations. If I were them, would I want to be saddled with those and the numerous other regs the MVPDs have to deal with?

I don't see over-the-top as a threat. Our members have been talking about how they better embrace over-the-top services to give consumers more choices in addition to the cable linear program service, while at the same time realizing their own business is migrating to a more broadband centric one.

And if your model migrates from traditional video to over-the-top video, cable ops would benefit from not bringing that MPVD designation with them?
There is certainly that. Anything to get us out of retransmission consent and some of the other onerous regulations we've had to deal with out of the 1992 Act. I'm not saying that that is going to happen, but certainly that is an issue going forward as our members migrate their identify from video providers to broadband providers.

What role does the cable industry have in addressing the violence issue?
We were happy to be part of the industry effort announced last week to help educate consumers about the tools available to help them. At the end of the day, there is a lot of programming which many families no doubt find objectionable. So whether they use the parental control tools available to them, change the channel or just turn off the TV, we encourage them to do that.

Even though there is violent programming on TV, our consumers generally demand quite a wide array of programming. Look at the most popular show on television today, The Walking Dead. I watched a little bit of that show recently for the first time ever and it has zombies and lots of guns. But people love watching that show and it is something they can watch and not be influenced by.

For those parents with young children, they have a responsibility to be mindful of what their kids are watching whether they use the parental control tools or watch what their kids watch and turn off the TV or change the channel.

That's what we can do to start with. But there has to be more discussion on this as part of a nationwide dialog and we are happy to be part of that discussion.

Any final thoughts?
Reaching 20 years has caused me to reflect a lot on our members. They are not always the headline stories because they are smaller. But they are amazing to watch. I think they have a bright future because they are capable and committed and they are dedicated to their businesses, their communities, their employees and their customers.