There were few surprises at the Senate Commerce Committee hearing Tuesday on the hot-button topic of retransmission consent and the Cable Act of 1992, except that the chairman did not grill any of the witnesses and that questioning of the witnesses lasted only about 45 minutes, though it is unlikely to be the last word on the subject.
Indeed, it was billed by one senator as the beginning of a conversation. If so, it was a relatively polite one. Cable ops said the Act had been overtaken by marketplace changes and was long in the tooth, while broadcasters argued that 20 was barely out of adolescence and no reason to ditch the system.
CBS chief retrans negotiator Martin Franks characterized the cable and satellite operators pushing for Cable Act reforms as an "unholy alliance" of distributors who were supposed to be competitors but had banded together to deprive broadcasters of the compensation they so clearly merit.
And while chairman Jay Rockefeller (D-W. Va.) hammered cable over rates in his opening statement and said the hearing was about more than retrans, that was the major focus, though programming costs were a big part of that discussion.
Sens. Rockefeller and Mark Pryor (D-Ark.) both pushed for more transparency in terms of what cable operators are charged for programming.
American Cable Association chairman Colleen Abdoulah said she would like to be able to share that info, but her contract would not allow it.
After Abdoulah and Franks got into a gentle tussle over their relative market power in negotiations, Rockefeller asked them if they could give him the info on prices, but to no avail.
Franks took issue with Abdoulah's claim of lacking leverage in negotiations. He initially pointed out to the committee that CBS has done close to 100 retrans negotiations in the past six years without incident, including with Abdoulah's company, WOW! Internet, cable and phone, as well as the other cable exec seeking congressional revamping of the Cable Act, Melinda Witmer of Time Warner Cable.
He also pointed out that WOW! would not agree to carry CBS' sports network, suggesting that gave lie to the image of the big bad media company and the weak ACA member. Abdoulah said she had evidence that smaller operators did not have leverage and had to pay more for the same channels than larger operators, and added that she only wished she provide that evidence. Martin took the chance to make a pitch for carriage of the sports net, but she said it was not something her customers were asking for.
Sen. James DeMint (R-S.C.) put in a plug for his bill that would get rid of the compulsory license and retrans, saying he thought broadcasters would do fine negotiating for their content without help from the government. But Franks and National Association of Broadcasters president Gordon Smith saw it quite differently.
Smith suggested that the number of negotiations that would be necessary would increase by tenfold, and thus logic would dictate, create ten times the opportunities for disruptions. Franks agreed, and also pointed out that CBS spent over $5 billion on content based on the current system, which he called "the devil you know."
Former Senator Smith told the panel, some his former colleagues on the committee, that broadcasters were still not getting compensated for their content. But Witmer said that Time Warner Cable paid 69% of its programming costs to the owners of broadcast stations -- when you add in their co-owned cable channels including ones launched as part of retrans deals.
In the early days of retrans, there were few cash deals, with broadcast parent companies compensated through ad inventory and carriage of co-owned cable channels.
Sen. Tom Udall (D-N.M) Smith's cousin, said he had heard from a religious broadcaster about the importance of must-carry. That gave Smith the opportunity to make the point that the must-carry rules had helped niche, diverse, often minority-targeted stations get to viewers. He added that without must-carry, you would not have Univision, and even Fox, joking that chairman Rockefeller might not have minded that.
But former Fox executive Preston Padden was ready for the must-carry/retrans rules to go away. He told the committee that he did not think that would lead to any increase in deals not getting done.
Udall also gave Abdoulah an opening. He said that small rural cable operators had told him they had to pay more for programming that some larger operators in New York and LA. "What explains that difference?" he asked.
"Leverage," said Abdoulah, in they walk with the same service and charge us double-digits more, she said. She pointed out that her leverage is cutting off 5,000 or 500 subs, while a Comcast has 24 million subs it could shut off.
Sen. John Kerry put the hearing in perspective, making the point that there remained a gulf between the DeMint approach of sweeping away retrans and copyright licenses and basic-tier must-buy and media ownership and those who, like Kerry, would oppose such a move for, among other reasons, because he wants to preserve local broadcasting, something he said was an important goal of the 1992 Act.
He said such sweeping deregulation would have profound impacts on distribution and concentration of ownership, including possibly cutting the local stations out of the equation as cable channels purchased content directly from a single source. He said that the Cable Act had brought the Congress pretty much what it wanted -- pretty broad-based competition, but that to sweep away the Act would likely leave very few broadcasters in its wake.
Kerry, who has urged the FCC to get more involved in resolving retrans disputes, urged it to wrap up its review of retrans rules launched in 2011.
Kerry said he thought broadcasters should be fairly compensated, but he also said he did not want to see repeated signal-pulling become a common tool in retrans disputes, saying it was not fair to consumers. Abdoulah echoed that sentiment, saying that beyond the question of how the system was working for the parties was how it was working for the consumers. She said it wasn't, citing 69 blackouts already in 2012.
Kerry said that in extreme cases signal-pulling may be only choice, but that there should be a way to set up a process whereby there is still access to must-have programming like football games or the World Series or candidate debates. "Consumers should not be pawns in negotiations," he said.