McSlarrow: Lean On Stations

FCC Urged To Hold Off Retrans Talks Until Digital Switch Is Complete

By Ted Hearn -- Multichannel News, 9/20/2008 7:15:00 AM

Washington— Congress needs to pressure TV-station owners to postpone cable carriage disputes until after the government-mandated digital television transition in February, according to National Cable & Telecommunications Association president Kyle McSlarrow.

Thousands of carriage contracts between cable operators and local TV stations expire at the end of the year. Failure to reach new deals could result in TV stations’ pulling signals from cable systems in January, confusing consumers a few weeks before TV stations need to turn off their analog signals on Feb. 17.

“I would urge this committee to make clear in unmistakable terms to broadcasters around the country that the digital transition is not business as usual,” McSlarrow said in testimony before the House Subcommittee on Telecommunications and Internet Sept. 16.

The cable and broadcast industries have budgeted a combined $1.2 billion to educate consumers about the impact of the DTV transition. Tens of millions of analog TV sets wouldn’t function after the transition unless they have a pay TV connection or are attached to over-the-air, digital-to-analog converter boxes.

Every three years, TV stations have the right to demand cable carriage, or negotiate deals in a process called retransmission consent. To ensure that a breakdown in carriage talks would not confuse consumers on the eve of the transition, a group of small and midsized cable operators has called on the Federal Communications Commission to bar TV stations from withholding signals from Dec. 31, 2008 to May 31, 2009.

The National Association of Broadcasters has adopted a voluntary quiet period, running from Feb. 4, 2009 to March 4, 2009. NAB’s quiet period would not require TV stations to restore signals that had been pulled prior to it.

NAB’s refusal to start the quiet period in December appeared to be intentional, McSlarrow said.

“The fact that they have chosen January as the carve-out is precisely because some stations, some broadcasters would like to threaten loss of signals. That’s the risk of confusion [to consumers],” McSlarrow said.

Rep. Anna Eshoo (D-Calif.) endorsed a quiet period with a December start date.

“There’s a big thing that happens in January. It’s the [National Football League] playoffs,” said Eshoo. “Can you imagine if this thing is dropped during the NFL playoffs? I mean, there’ll be a revolution in the country.”

Super Bowl XLIII is set for Feb. 1, three days before the onset of the NAB’s quiet period.

NAB President David Rehr told the subcommittee that retransmission consent disputes that led to pulled signals have been very infrequent since 1992 when TV stations first gained the legal right to negotiate cable carriage.

The FCC, he added, has authority to insist that that everyone negotiate in good faith.

“There has only been one occasion when the FCC has said a party has not been negotiating in good faith and it wasn’t a broadcaster. It was a satellite distributor,” Rehr said. “The FCC has never found a broadcaster not operating in good faith.”

In his statement, McSlarrow acknowledged that the “overwhelming number of cases ... will probably be worked out at the bargaining table.”

Nonetheless, McSlarrow went on the offensive about retransmission consent based on published reports that TV-station owners planned to seek much higher cash payments from cable operators over the next three years. Unnamed private-equity firms and hedge funds, he added, have been investing in TV stations to make “a quick buck” on potentially lucrative retransmission consent deals

“I do want to flag what is potentially a coming storm,” McSlarrow said. “If you go by public statements from some broadcasters, there’s a desire to ratchet up dramatically — in some cases, 500% — the cost of those signals that would be carried by the consumers.”

FCC chairman Kevin Martin proposed two quiet periods: Either Jan. 15, 2009, to Feb. 28, 2009, or Dec. 15, 2008, to Feb. 28, 2009, an FCC official said.

Last week, Martin indicated he now favored a quiet period beginning three weeks before the DTV transition.

“I think it’s critical that it occurs right around the Feb. 17 transition date — for some period of time shortly before and for some period of time shortly thereafter,” Martin said. “So that there’s no confusion from the consumer perspective that if they lost any kind of signal, it wasn’t because the transition but rather because of any negotiations that were going on.”

Rep. Charles Gonzalez (D-Texas) indicated support for Martin’s quiet period. “That’s the end game here — it’s not to give advantage to any particular stakeholder,” he said.

Eshoo disagreed. “I think we should start sooner and stretch it out a little later,” she said.