No Middle Ground on Must-Carry

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Broadcasters and cable operators didn't get any closer to
compromise in the debate over digital must-carry late last month, each insisting in
comments to the Federal Communications Commission that an all-or-nothing approach is all
either can stomach.

The National Cable Television Association reiterated its
claim that cable operators would be forced to jettison a number of established cable
networks to make room for digital broadcast channels.

But the National Association of Broadcasters said any
effect on cable network carriage would be "de minimus" over time because
capacity on cable systems is increasing so rapidly.

The FCC has opened a proceeding to determine whether it
should require cable operators to carry both digital and analog broadcast channels during
a transition period before broadcasters must give back the analog spectrum. The giveback
is supposed to occur in 2006, although most experts expect Congress to extend the deadline
if a large number of citizens still haven't purchased digital TV sets.

On that note, NAB has found an ally in the Consumer
Electronics Manufacturers Association, which has been pushing for full digital must-carry
to encourage the sale of digital TV sets, arguing that such sales are vital for the 2006
date to stick.

"We again urge the commission to rely on the
marketplace -- and not impose an unconstitutional double dose of must-carry, which would
harm consumers, cable operators and cable networks," NCTA said.

The NCTA cited data suggesting that 70 percent of cable
customers are served by systems with fewer than four available channels on their systems,
and that half of all customers are covered by systems with no channel openings. It also
said other data cite even higher numbers -- more than 83 percent and more than two-thirds,
respectively, are in channel-locked systems.

"Even as capacity expands, available satellite
programming will exceed available capacity for the foreseeable future," NCTA
asserted.

NCTA said that the marketplace -- not the government --
should determine what programming services survive.

"There is no reason that consumers would, during the
transition, choose to receive broadcasters' digital signals instead of the cable networks
that would be displaced -- and the broadcasters concede as much," the NCTA said.
"But in their view, consumer preferences and marketplace competition are secondary to
the primary goal of expediting the purchase of digital sets."

NAB, however, said that the cable industry's predictions
are "inherently unbelievable" and "ring even more hollow today than they
did [and were shown to be] before," when cable operators predicted "devastating
results" from analog must-carry.

"Cable's predictions of severe programming losses from
DTV must-carry simply cannot be squared with the real world," NAB said. "Cable's
obfuscation aside, cable capacity is exploding and will continue to explode so that the
impact of digital must-carry on cable will be de minimus."

It cited data suggesting that the average cable system has
90 channels now, and that capacity is expected to leap to 130 channels per system by 2003.
In addition, NAB cited a study by Donaldson, Lufkin & Jenrette forecasting that
digital cable's current 1.7 percent penetration will rise to 32.4 percent by 2003.

Furthermore, NAB said the cable industry "misses the
point" when it argues that digital must-carry would create an unfair preference for
broadcasting over cable networks.

"In complaining that DTV must-carry is unfair, cable
ignores the public interest in preserving the competitiveness and multiplicity of free
television through the DTV transition," NAB said.

In addition, NAB urged the FCC to continue "strong
oversight" over industry efforts to ensure that digital TV receivers and cable
systems are compatible.

And NAB also said that the FCC should require
"priority carriage" for the one digital signal of every must-carry eligible
broadcast station in a given market before allowing cable operators to carry any
broadcaster's second signal. That's an issue that could come up as cable systems negotiate
retransmission consent agreements with the major broadcast networks.

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