Cox Communications Inc. CEO James Robbins is plenty upset with ESPN, telling Congress that networks that cost him more than $1 per month should not be allowed to claim a slot on expanded basic. While he's not yet willing to ask for legislation, Robbins is unsure whether he can stick to that position if some kind of compromise with ESPN cannot be reached. Washington News Editor Ted Hearn conducted an interview with Robbins, head of the No. 4 U.S. MSO, on May 6 in Cox's Washington, D.C., office, a few hours after Robbins testified before the Senate Commerce Committee. An edited transcript follows.
MCN: What has been the effect of the Yankees Entertainment & Sports Network-Cablevision Systems Corp. carriage dispute in New York on the larger cable and direct-broadcast satellite industries?
James Robbins: I don't think a lot, other than it's caused all of us to kind of think through the issues and sort out where we want to come out on this kind of thing. I think New York, in a lot of ways, has been a cauldron that's sort of confined to New York. But I go back to what I tried to say today, and that is, over a buck wholesale to the distributor — the dilemma is not so much the pricing as it is the mandatory broad distribution requirement. That is the issue.
I'm not going to fight the marketplace and what people are paying hockey players or baseball players or football players. But, over a certain price point, I think the consumer should have a choice of whether they want it or they don't want it. And, that's where the sports guys separate themselves out from all the other programming services.
MCN: Does the government need to look at the structure of sports leagues, which seem to be the place where these huge costs are accumulating?
Robbins: My first, second, third, fourth, and fifth wishes would be that the government not get involved, that we solve this in the marketplace. Now, if that can't happen, then we cross that bridge when the time comes.
But this hearing was on cable rates, and I was there to explain why cable rates were up three times the rate of inflation, and they were up three times the rate of inflation because of the sports programmers. I came here to educate people today, to let people know where the pressure is coming from, because we can't continue to absorb 20% increases on our programming costs. Period. Enough already.
And we're raising our hand and saying enough already, because AOL Time Warner is trying to get an IPO out the door. Comcast is the Big Kahuna. We think we are a responsible player in this business. We are unencumbered by those kinds of issues, so we are raising our voice.
MCN: Any cable network that comes in over a buck …
Robbins: Wholesale, to me, over a buck …
MCN: By contract, that programmer has to agree to be sold a la carte or in some tier?
Robbins: Tier. I'm not saying a la carte.
MCN: A mini-tier of a couple of channels?
Robbins: I'm just saying on a tier.
MCN: Are you're saying, as a market participant, you do not have the power to say no to The Walt Disney Co. and ESPN?
Robbins: I'm suggesting that they change their way of doing business.
MCN: But you cannot credibly threaten to drop them, because of their power in the market …
Robbins: I'm not saying that. You're saying that.
MCN: It's a question. Are you saying that?
Robbins: That's a question that we have, too. I don't know the answer to that. I'm hoping that we don't have to go to drastic steps like that. That's the train wreck. But you've seen little train wrecks in Florida and Minnesota, and in New York. The writing is on the wall. Something's got to change, or we're going to have a big train wreck.
MCN: Why don't you make the argument that, according to FCC data, on a per-channel basis, adjusted for inflation, cable rates haven't gone up, they haven't stayed flat, they've gone down?
Robbins: I can do that. I mean, I don't think that's what [Senate Commerce Committee chairman John] McCain was after. He's after 5 or 6% a year. And, the rate of inflation is 1 or 2%. That's what he's going after.
MCN: Is this just a Disney/ESPN-centered dispute here, and was the purpose of today's hearing to beat up on ESPN? Or is there really a broader problem afoot here in cable?
Robbins: There are others — anybody who wholesales at greater than a buck.
MCN: Who else is in that zone?
Robbins: You know who they are.
MCN: I don't.
Robbins: Other sports guys, simple as that.
MCN: News Corp?
Robbins: ESPN is the most vital one, because they keep coming back with 20% increases. But Fox Sports and the Sunshine Network came up with a 40% increase, as I understand you guys reporting it last January. They got shut down.
MCN: You've been in this business a long time. Are you optimistic? It seems like there's a real civil war here.
Robbins: I wish I were more optimistic.
MCN: If broadcasters have so much clout in the retransmission market, why haven't they been able to obtain carriage of their digital signals?
Robbins: First of all, I think many broadcasters haven't figured out, at the local level, what they're trying to do with their digital signals. They've also been screaming for must-carry, which I think the policy makers rightfully have said no, up to this point. But they'll try any way they can.
What I object to is when [Fox-owned] WTTG out here [in Washington D.C.], for retransmission consent of that signal to our cable system in Fairfax County [Va.], forces me to take a couple of services that nobody's ever heard of — national distribution — that's where, I think, retransmission consent has run amok.
MCN: Is Cox going to lobby the federal government or state government to reject or modify the News Corp-Hughes Electronics Corp. merger?
Robbins: Don't know that. We're thinking through that issue right now.
MCN: Can you identify a couple of concerns, if you have any?
Robbins: Well, I think you heard some of them in the hearing this morning. Retransmission issues. Bundling of different services. So we have not taken a position on this. We do not have a position on this.
MCN: Is it fair to say that the concern you have is that News Corp will be able to use its programming assets to raise your costs — ergo retail cable rates — and make you carry programming services that your customers may not want?
Robbins: Those are your words, and you're asking me to give you a yes or a no against that statement, and I'm not going to give you that, because we're not there yet.
MCN: When do you think you will get there? Is it something you can nail down?
Robbins: I don't know.
MCN: What do you make of Verizon's decision to cut its DSL rate 20%?
Robbins: I don't understand the strategy, because we are led to believe that the DSL business is not wildly profitable for them at current prices. Again, I did say yesterday we're not experts on the telephone economics, but we have enough knowledge to know that, you know, they haven't been making a lot of money in this area. So I don't understand the corporate strategy, why you would add losses on top of losses.
But I guess the flip side of it is, if you are only getting a 20% share of market, 25% share of market — because when we run head to head, we are getting 75% of connects — I suppose [they've] got to do something.