Rutledge: Fox Demands 'Inappropriate' Given Economy Status


Cablevision Systems COO Tom Rutledge said at the CTAM Summit closing general in New Orleans the biggest factor in Cablevision's now 5-day-old carriage dispute with Fox Networks is the country's jobless rate and the underlying anemic economy.

Cablevision and Fox continue to disagree on compensation for Fox broadcast and cable outlets, even as Federal Communications Commission chairman Julius Genachowski urged the parties to bury their differences and reach a deal.

Fox pulled broadcast stations in New York, New Jersey and Philadelphia as well as cable networks Fox Deportes, Nat Geo Wild and Fox Business Network on Oct. 16 after talks on retransmission payments did not lead to an agreement.

Citing a decline in the industry's multichannel subscribers in the most recent quarter, Rutledge said Cablevision's refusal to pay retransmission-fee increases to News Corp.-owned Fox was based on customer's ability to pay those increases.

The industry-wide decline in subscribers is a direct result of the economy, Rutledge said while noting that Cablevision actually managed to grow subscribers by taking market share from competitors.

"It's not cord cutting -- it's people actually unable to afford to stay in the homes," Rutledge said during a panel discussion. "The actual occupancy rate in housing has declined. "

Citing an unemployment rate of 15%, including jobless and those who have quit looking for work, "it is a bad economic situation," he said.

Said Rutledge, "We don't think it's a time to be raising rates on people who can't afford it."

"To try to restructure the industry on the backs of consumers with the power that comes from broadcasting, the power that comes out of the public service obligation and the federal license seems in appropriate to me and inappropriate to Cablevision," Rutledge said. "So we will not pay those kind of increases."

Rutledge said the situation calls for government intervention, in part because all basic rates of cable operators are regulated by the FCC.

Aside from strong urging from the FCC's Genachowski, U.S. Sen. John Kerry (D-Mass.) introduced a draft bill that would require broadcasters to keep their signals on distributors' systems through negotiations and would make the FCC mediator in such talks.

The topic of the weak economy and contraction of households came up again and again when the closing general session panel discussed new services.

"I think that we have to be aware of the poverty and what it means for growing this industry," Craig Moffett, senior analyst with Sanford C. Bernstein & Co., said.

Moffett said that about 61% of all the sources of income for the bottom 40% of U.S. households in the country is welfare, food stamps, Social Security or pensions.

"There are a lot of customers right now who just can't afford the product," Moffett said.