Below is an excerpt from testimony to the Senate Commerce Committee last week by Patrick Knorr, vice chairman of the American Cable Association (ACA), which mainly represents rural cable systems. He also operates a small cable system in Lawrence, Kan.
For the digital transition to be a success, it must work for all Americans, including those in more rural markets. But the costs of the transition will have a disproportionate impact on rural consumers and systems. ACA has some ideas on how to deal with this.
First , cable operators need to have the flexibility to downconvert digital signals without the burden of mandated dual carriage. Smaller systems need this flexibility because they cannot support the costly infrastructure necessary to provide these redundant channels.
Second, satellite-delivered local signals need to be available to rural cable operators on a nondiscriminatory basis.
In some markets, digital signals will not be strong enough to reach the headend, meaning the viewer who previously could receive an analog signal is now left without a picture—a situation known as the “digital cliff.” Consumers will find themselves staring at blank TV screens.
[There is a] second set of issues: Outdated retransmission-consent and programming rules must be addressed during this transition.
Many of us are already seeing abusive behavior by big broadcasters as they exploit government-granted powers.
My company, like many ACA member companies, has invested millions to upgrade systems to launch DTV, only to have some broadcasters use their market power to hold up retransmission consent. Some are demanding unreasonably high fees just to grant access to the DTV signal. Incredibly, others will not even have the courtesy to return our calls.
Some broadcasters are now demanding substantial cash payments from smaller cable companies. I am hearing of demands of 50¢ to $1 dollar or more per channel, which adds up to rate increases of $2-$5 per month for each subscriber for the same broadcast signals they receive today.
In some markets, these demands are only made of small operators. Big cable companies are paying nothing, while rural customers are being gouged for cash. The sole reason this can occur? The broadcasters have market power, granted to them by the laws and regulations of the analog era. The intent of retransmission consent was to protect “localism,” not to promote “profiteering.”
Most important, broadcasters use exclusivity to block cable operators from obtaining network signals at a lower cost.
Fortunately, there are solutions to this problem: 1) Eliminate exclusivity when a broadcaster elects retransmission consent and seeks additional consideration for carriage. 2) Prohibit any party, including a network, from preventing a broadcast station from granting retransmission consent. 3) Codify the retransmission-consent conditions imposed on the News Corp./DirecTV merger to apply to all retransmission-consent agreements.
Finally, I would encourage you to at least pierce the programming veil of secrecy by authorizing the FCC to obtain specific programming contracts and rate information in order to develop a Programming Pricing Index (PPI), that would be a simple yet effective way to gauge how programming rates rise or fall.