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 3/11/2013 12:01:00 AM Eastern

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Congress can intervene to update what are clearly outdated rules, either as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

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

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

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.