DIGITAL-CARRIAGE DANCE TV Lobbyists Split on Position


Washington -- Broadcasters are diving into the digitalmust-carry debate that was launched last week by federal regulators, with the four majornetworks veering off from the independents -- a split that could benefit the cableindustry in the lobbying war at the Federal Communications Commission.

A less-than-united TV-station lobby could help cableoperators to dilute must-carry proposals as they percolate at the FCC in the months ahead,and it could help them to persuade the agency to adopt only a narrow set of carriagerequirements.

FCC officials said last week that they were open-minded ondigital must-carry issues, and that they would seek public comment on various scenarios,including requiring no carriage in favor of marketplace solutions.

"I won't speculate where that comes out, but Ithink that it's clear that the broadcast community is not united on thisquestion," said National Cable Television Association president Decker Anstrom.

Yet William Johnson, deputy chief of the FCC's CableServices Bureau, told reporters that the "tenor" of the FCC's notice ofproposed rulemaking "is that there is going to be a carriage obligation."

Trouble within the broadcast ranks, latent for months,became obvious last week.

After testifying July 7 before a Senate Judiciarysubcommittee, ABC Inc. president Robert Iger said digital must-carry rights for hiscompany's TV stations were unnecessary. Officials at CBS, NBC and Fox have beenquoted this year as expressing doubts about digital must-carry.

"We're having very productive discussions with avariety of cable entities about carriage of digital signals, and we believe that it wouldbe premature for there to be any government intervention in that regard," Iger said.

The next day, Gregory M. Schmidt, a vice president at LINTelevision Corp., testifying before the Senate Commerce Committee on behalf of theNational Association of Broadcasters, said: "We need the FCC to approve a strong,clear digital must-carry regime to ensure that our signals reach consumers."

According to an FCC official, the mathematics of analogmust-carry and retransmission consent explain the lack of digital unity: From 1993 to1996, 90 percent of network affiliates chose retransmission consent, while 80 percent ofthe independents chose must-carry.

"The NAB wants digital must-carry for the smallguys," an FCC source said.

Another dynamic was also at work, industry sources said:The major networks may not want digital must-carry for the independents and smallernetworks like The WB Television Network and United Paramount Network because that couldresult in cable operators dropping broadcaster-owned cable networks to comply with FCCmandates.

Iger, however, disputed that the potential of losingcarriage of ABC parent The Walt Disney Co.'s cable networks was the basis of hisopposition to digital must-carry.

"I've got a number of concerns about governmentintervention, but that wouldn't be one of them," Iger said.

James B. Hedlund, president of the Association of LocalTelevision Stations (ALTV), said ABC's cable-programming interests, including ESPNand Disney Channel, would protect the network's launch of digital broadcasting.

"They figure that they have more than enough cloutwith the cable industry with those franchises, and also, they don't want to piss offthe cable industry if they want to launch new networks," Hedlund said.

So what's the FCC going to do? FCC officials said lastweek that for now, they had more questions than answers. They urged cable operators andbroadcasters to focus on the facts and to skip the legal threats and apocalyptic rhetoric.

"My plea to the interested parties here is to focus onhow we can best bring digital signals to Americans, and not on how we're going tolitigate these issues," FCC chairman William Kennard said.

Kennard's request was observed for about two hours.

"Make no mistake, the cable industry wants to controlthe digital rollout. In the name of protecting additional pay-per-view and adult-moviechannels, it wants to endanger the initial construction of an entirely new, terrestrial,free, over-the-air digital-transmission system," Hedlund said in a preparedstatement.

Anstrom issued his bottom line, saying that cable operatorswould fight if the FCC forces them to carry both analog- and digital-TV signals.

"We'll never agree to that," Anstrom said."The marketplace should be given a chance to work."

In May 1999, the FCC is requiring the four major broadcastnetworks and their affiliates to begin digital service in the top 10 markets, expanding tothe top 30 by November 1999. (About two-dozen stations have agreed to go digital inNovember 1998.) In May 2002, all commercial stations are required to be on the air withdigital signals.

Under FCC rules and federal law, the TV stations arerequired to return their analog licenses Dec. 31, 2006, if (among other things) at least85 percent of TV households in their markets have digital TV sets or digital converters.

In his Senate testimony, Schmidt said the transition todigital would flop if TV stations are denied access to the 66 percent of households thatare served by cable systems.

"Many of those viewers will never see local digitaltelevision if it is not provided over their cable systems," Schmidt said.

Brian Lamb, chairman and CEO of C-SPAN, told the Senatepanel that his two public-affairs networks would suffer massive subscriber losses if theFCC required cable carriage of digital and analog signals.

In New York, Lamb said, 18 cable-programming services wouldbe supplanted to accommodate the digital signals of that market's broadcasters. And,he added, the situation would repeat itself in other markets.

"We'll be gone, I guarantee you, in millions ofhomes. I can promise you that," Lamb said.

Cable-industry leaders have said before that while millionsof cable subscribers would lose cable networks, only a handful of subscribers would seethe new digital-TV signals -- those who had gone out and purchased digital TV sets.

Alan McCollough, president and chief operating officer ofCircuit City Stores, said he expects the first wave of digital-TV units to go on sale inNovember and to cost between $5,000 and $8,000 each. The first generation, he said, wouldbe incompatible with cable digital set-tops.

Joe Collins, chairman and CEO of Time Warner Cable, urgedrestraint by the FCC, saying that digital must-carry could prove to be disruptive and itcould anger consumers. "The hardest thing to do as a cable operator is to remove aservice from the system," he added.

Senate Commerce Committee chairman John McCain (R-Ariz.)said after the hearing that he was neutral on digital must-carry, adding that he wasequally concerned about C-SPAN and independent TV stations that rely on must-carry becausethey don't have the clout to negotiate carriage deals.

The FCC has a host of technical and policy decisions tomake, including whether cable operators should be required to carry all signals if a TVstation splits its bandwidth, and whether they have to provide digital-TV signals as abasic service.