Washington

Senate Hearing Finds State of Video in Flux

Cable, broadcast execs talk a la carte, retrans and more 5/14/2013 01:17:52 PM Eastern

There appeared to be a lot more questions than answers about the state of video at a Senate Communications Subcommittee hearing Tuesday.

The general consensus was that the marketplace for video deliver was changing rapidly and government needed to take that into account. But there was not a lot of focus on what exactly Washington should do about it. There were no strong a la carte advocates among the senators -- that advocacy came almost exclusively from former subcommittee member and Commerce Committee chair, senator John McCain (R-Ariz.), who made a special guest appearance.

Sen.Mark Warner (D-Va.) signaled he was troubled by News Corp. president Chase Carey's warning that if broadcasters lost the Aereo challenge, some high-value content might have to move to cable, but mostly the hearing reviewed the witnesses' positions and gave them the opportunity to make their points for new members of the committee.

National Cable & Telecommunications Association president Michael Powell got a chance to respond to Sen. McCain's push for a la carte legislation, introduced last week, while National Association of Broadcasters president Gordon Smith advised that whatever government does or doesn't do, it should keep the value of free, over-the-air broadcasting top of mind. He also had a message for critics of broadcasters' use of the airwaves. "What is it about free and live and local that you don't like?" he asked.

Powell offered no policy solutions. He said that NCTA did not endorse sweeping Cable Act reform, suggesting that it was too fast-moving a space for what would, by its nature, be a slow process. And while he said surgical strikes on particular elements might be in order, he did not offer any of those, citing his membership's differences of opinion. NCTA members include both the operators who have to buy programming in bundles and some of the programmers who bundle them.

McCain kicked off the hearing with a statement on his bill. He said consumers didn't want all the channels cable was bundling together. While he said he was an EPSN fan and wouldn't give it up, he argued that most people weren't and didn't want to have to pay the several dollars it cost per sub.

Powell said that he understood why letting consumers pick and choose the cable channels they want is a noble-sounding goal that seems to make intuitive sense. But he countered that as numerous studies have shown, it would not necessarily lower cable bills or redound to the benefit of consumers.

Powell pointed out that without the broad potential audience as part of a programming package, niche channels and new channels would have a harder time getting viewers and advertisers, which would force them to charge more for the channel, which would raise the price. He suggested the result could be that ten a la carte channels might cost as much as 100 channels in a package.

He also pointed out that one of the values of the TV experience is stumbling on a program you didn't know you wanted to watch, or finding networks that meet changing viewing interests, both of which would be harder to do in an a la carte world.

Smith warned that DISH's ad-skipping technology threatened the ad side of the broadcast revenue stream model responsible for all that free, local, public interest programming broadcasters supply, while Aereo threatened the other revenue stream, retransmission consent.

DISH executive R. Stanton Dodge, who testified at the hearing, countered that The Hopper did not delete ads, only gave subscribers the option of skipping them.

Smith came just short of branding Aereo a pirate, but as much as said that it was piracy to provide TV station signals and charge for the service while not paying a copyright fee, as MVPDS do. There was no Aereo exec on the panel, but a strong defense of the service came from John Bergmayer, senior staff attorney at Public Knowledge.

He said two courts had already concluded Aereo was a remote TV antenna rental service.

Smith defended retrans, saying that it represented only pennies of a cable bill for content that was the most valuable on pay TV.

Citing Carey's threat to move programming, Sen. Warner came close to endorsing a McCain bill provision that would attempt to block that by requiring any broadcaster whose over-the-air TV station content did not match the version carried on cable to give up its spectrum to the FCC for reassignment.

Warner said that when he heard Carey's statement, it raised "real concern" with him.

Warner, a former wireless exec, pointed out that those companies had bought their spectrum at auction while broadcasters had not. He said that if broadcasters were threatening to take some of their high-value content off free TV, it raised the question of whether they should be able to keep it or whether it might be repurposed to a higher public good.

Smith called Fox an esteemed member of the association and said he could not speak for Carey. But he did suggest that Carey was speaking in hypotheticals and in response to the need to pay for enormously high-value content. He said he understood Warner's concern, but he took issue with the suggestion that broadcasters got their spectrum for free.

 

Echoing a point he made repeatedly throughout the hearing, Smith said that broadcasters paid for their spectrum daily via public interest obligations like local news and weather and emergency information. He had earlier made the point that they also had programming obligations and were subject to indecency regs, which meant that they could not compete for the lowest common denominator, as could their competitors. He suggested that trying to put public interest obligations on the Internet would destroy many a business model there, as well as being a "steep climb" for the Senate.

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