Telling Washington that cable and broadcasters can resolve
their own issues, NBC and AT&T Broadband & Internet Services have reached an
agreement on digital-broadcast carriage in a long-term deal that includes retransmission
consent, the upcoming Olympic Games and rate hikes for CNBC and MSNBC.
Under the pact, AT&T Broadband agreed to carry the
digital signals -- including high-definition television -- of all 13 NBC
owned-and-operated TV stations through the end of 2008, officials said last week.
AT&T will provide NBC's digital offerings to its
subscribers in systems rebuilt to 750 megahertz or higher.
The agreement is the second digital-spectrum-carriage pact
between an MSO and a broadcaster. Last December, Time Warner Cable and CBS Corp. inked
their digital-broadcast-carriage deal, which covers the 14 TV stations that broadcaster
"I needed to have retransmission consent,"
AT&T Broadband president and CEO Leo J. Hindery Jr. said.
Hindery added that he hoped the deal would become a
"template" for retransmission-consent deals with other broadcasters, as well as
with NBC TV-station affiliates.
NBC's and AT&T Broadband's digital-carriage
agreement is part of a complex eight-year deal that includes renewals for CNBC and MSNBC.
Under the agreement, AT&T Broadband also becomes the
first MSO to hop onboard for the Olympics, reportedly agreeing to pay a surcharge to NBC
in order to carry coverage of the next five Olympics on CNBC and MSNBC.
Hindery and David Zaslav, president of NBC Cable
Distribution, stressed that the complex deal illustrated that there was no need for
government regulation, by the Federal Communications Commission or anyone else, of
relations between broadcast and cable -- in other words, digital must-carry.
"This shows that these two industries can work
together," Hindery said.
Said NBC Cable president Tom Rogers: "Reasonable
people can come to terms in these issues. This is a blueprint showing that cable and
broadcast can relate in an amicable form going forward."
Hindery also said he was eager for cable to finally have
access to Olympic programming, free on basic, as well as to local avails during the Games.
"I can't conceive of a single operator not
jumping up and down for this," he added. "We've learned that these games
are a very important part of consumer viewing habits."
Operators have been wondering whether AT&T Broadband
would ante up the $1-per-year, per-subscriber surcharge over eight years that NBC is
asking MSOs to shell out -- or if the giant cable operator is getting a big price break.
During a press call, Hindery didn't discuss
specifically if AT&T is paying the full $1 surcharge.
"I don't ever disclose what I pay for programming
in this kind of forum," Hindery said.
If AT&T Broadband is paying the full freight for the
Olympics -- or close to it, which some sources said it is -- it may be setting a standard
for the rest of the cable industry, which has voiced some complaints about the Olympic
Other MSOs would probably be forced to follow AT&T
Broadband's lead and pay the $1 surcharge.
Under the long-term deal unveiled last week, AT&T
Broadband has also agreed to distribute MSNBC to its full base of subscribers by the end
of 2002. The MSO will have 15 million subscribers once it digests its acquisitions.
Coupled with rollouts by other operators, MSNBC will be in
more than 66 million homes within the next three years.
"This is a big deal for us because it reaches across
all of our properties," Zaslav said. "We're really excited to have reached
a broad, really long-term partnership with AT&T."
AT&T Broadband and NBC have agreed to work together to
ensure that NBC's HDTV programming will be able to be displayed on analog, NTSC
(National Television Systems Committee) TV sets, as well as on state-of-the-art HDTV sets.
This will most likely require the installation of special
software and chips in digital set-tops, according to Rogers.
"We will afford the consumer the opportunity to get
high-resolution programming on their traditional TV set," Hindery said. "We will
not compel them to go out and buy a new set."
In that respect, the NBC-AT&T Broadband
digital-carriage deal is reportedly significantly different than the one CBS struck with
Time Warner, in which CBS' digital signals will only be able to be seen on HDTV sets.
AT&T Broadband has agreed to pass through NBC's
digital signals in the 1080i (interlaced) format -- the same one CBS is using.
At one point last year, Tele-Communications Inc. chairman
John Malone (now chairman of Liberty Media Group) objected to that format eating up too
much valuable cable spectrum -- a problem that was alleviated with the 750-MHz system
NBC is already broadcasting The Tonight Show with Jay
Leno in HDTV, Rogers said.
Earlier this year, NBC sent out its new rate cards for CNBC
and MSNBC, including the Olympic surcharge.
In exchange for providing coverage of five Olympics on CNBC
and MSNBC, NBC proposed that operators pay a 4.5-cent-per-subscriber, per-month surcharge
on each of those networks for the full term of its new affiliation deals for those
services -- through 2008, or eight years.
That amounted to $1 per year, per subscriber over eight
Zaslav wouldn't comment on whether AT&T Broadband
agreed to pay that amount. But cable-operator sources said last week that NBC
representatives have assured them that the MSO is essentially paying that surcharge for
the Olympics, and it isn't getting any volume discount.
On top of the Olympic surcharge, AT&T Broadband is
paying rate increases on CNBC and MSNBC. Zaslav wouldn't comment, but CNBC's
rate is reportedly going up by 5 cents the first year, to 25 cents from 20 cents per
month, per subscriber. Each year afterward, the monthly per-subscriber license fee will
increase by 2 cents to 3 cents.
In the case of MSNBC, for the first year of the new
contract, its rate will jump 5 cents, to 22 cents from 17 cents per month, per subscriber,
sources said. Then, like CNBC, MSNBC's monthly per-subscriber license fee will
increase by 2 cents to 3 cents each year.
"I did increase the rates [AT&T Broadband is
paying for CNBC and MSNBC]," Hindery said. "I didn't increase them
Rogers stressed that this digital-carriage deal with
AT&T Broadband only involves NBC as a broadcast entity and its digital spectrum.
NBC's satellite-delivered offerings for cable operators' digital tiers, such as
a CNBC2, are not involved at all in this agreement, he added.
Hindery said NBC's HDTV signals will be available on