Washington— The National Cable & Telecommunications Association can expect stability at the helm for a few more years, as president Robert Sachs recently agreed to a contract extension until Dec. 31, 2004.
Sachs, the NCTA's top operating officer since August 1999, had about a year remaining on his current three-year deal. He and the chairman of the NCTA's board — Insight Communications Co. president and CEO Michael Willner — came to terms on a two-and-a-half year extension over a recent dinner in New York City.
Sachs' original contract paid him $850,000 for the first year. But NCTA officials last week declined to disclose financial terms of the extension, asserting that Sachs' salary would be made a part of the trade group's yearly filings with the Internal Revenue Service.
During his tenure at the NCTA, Sachs has witnessed the disappearance of MediaOne Group Inc. and Time Warner Cable owner Time Warner Inc. as independent entities. Today, the group's largest member — AT&T Broadband — has itself been targeted for takeover by Comcast Corp., AOL Time Warner Inc., the Walt Disney Co., Cox Communications Corp., or some combination of these companies.
In an interview, Sachs said last week he agreed to stay on because he genuinely enjoys the job. He described the high-profile merger activity, which has the potential to steer NCTA in new policy directions, as "a fact of life" and indicative of cable's need to bulk up to match the scale of the Baby Bells to be competitive in the voice and data markets.
"They are natural developments in a business, whose principal competitor is much larger in size — and by that, I mean the Bell companies," Sachs said.
Even though consolidation has chopped the NCTA's board from 40 to 32 members, Sachs said "it's still a pretty diverse industry" and merger turmoil has not proved burdensome when trying to reach consensus.
"People manage to separate out personal relationships from business relationships and things still flow pretty well," he said.
As Federal Communications Commission chairman Michael Powell said in June, the cable industry — which has a history of doing time in regulatory jail — today enjoys its best climate in years. But Powell warned that if cable operators exploit their market power, Washington policymakers might reach for the handcuffs.
Sachs disagreed that Powell's point was that the cable industry should roll over on open access to the Internet, digital must-carry and other issues if it wanted to avoid trouble in Washington.
"I don't think he was saying you have to cave on a regulatory issue," Sachs said. "I think he offered very sound advice to our industry."
More so than Congress and the federal courts, the FCC is the place where Sachs and his team of lawyers and lobbyists will focus their time and energy. During the next year, the FCC is likely to vote on a number issues of vital importance to the cable industry.
Here's a rundown on some of the hot cable issues in D.C., and Sachs' observations:
- Broadcast Ownership: The FCC might allow the four major networks—ABC, CBS, NBC and Fox—to acquire more stations, thus affording them greater bargaining power to require operators to carry their cable networks.
"If the broadcast-ownership cap is raised, it strengthens the hand of broadcast-affiliated cable networks because of retransmission consent," Sachs said.
The NCTA's board, however, has not taken a position on whether the ownership cap, which stands at 35 percent of TV households, should be retained or relaxed.
- Cable Ownership:
An FCC rule that limits one cable company to no more than 30 percent of the nation's 87.5 million pay-TV subscribers was tossed out by a federal court in March. The FCC is planning to revive ownership rules that can survive court review and is expected to seek public comment in September or October.
The NCTA, Sachs said, would likely urge the FCC to rely on antitrust laws "rather than some arbitrary number" to restrain an MSO from growing too large. Anything more specific than that from the trade group, he said, "is going to depend on how the FCC phrase its questions."
- Program Access:
Cable operators are forced to sell their satellite-delivered networks to the direct-broadcast satellite industry under a provision of the 1992 Cable Act that is scheduled to sunset in October 2002, unless the FCC opts to retain it. NCTA wants the mandate to sunset, while the DBS industry wants it to not only be retained, but expanded to include MSO-owned networks that are delivered terrestrially.
Although Powell and FCC Cable Services Bureau Chief W. Kenneth Ferree normally speak in deregulatory accents, both of them have indicated that it might be too soon to allow the must-sell rule to sunset.
Sachs said he felt the outcome of the program-access rulemaking, which the FCC is expected to launch in a few weeks, was wide open, despite some of the skepticism expressed by officials with the agency.
"I think they will give fair consideration to the arguments we put forward and the arguments that the others put forward," he said. "I have not seen any indication that they have prejudged the issue one way or another."
- Internet Open Access:
The cable industry has fought government mandated open-access rules since 1998, a fight triggered by America Online Inc. prior to its merger with Time Warner Inc. The FCC's Cable Bureau is drafting a report in the fall that could call for common carrier regulations.
- Sachs said he remains confident that the efforts of AOL Time Warner Inc., AT&T Broadband, Comcast, and Cox to move in the direction of open access show that the issue has been "overtaken by market developments," thus reducing the need for government action.
- Navigation Devices:
Cable is feeling pressure from retail stores that want to sell set-tops with the same technical capabilities as the boxes that MSOs supply to their subscribers. The issue also involves compatibility between digital-cable systems and digital TV sets, DTV-set labeling, and the phasing out of integrated analog-digital set-tops by 2005.
Sachs said the NCTA — most recently at its executive committee meeting in Newport, R.I., last month — has devoted untold hours to all the thorny technical issues associated with the DTV transition issues.
"What's happening in that area are complex issues that we have spent more time on than any single issue over the last two years," Sachs said.
At least one FCC official has threatened to impose compatibility standards if industry solutions fail to materialize.
"I don't know if the [FCC] is going to get back into it and impose standards. It's on the [FCC's] priority list and it's really kind of part of the larger digital transition issues," Sachs said.
- Digital Must-Carry:
The National Association of Broadcasters claims TV stations'conversion to digital will be a bust if the FCC fails to require cable operators to carry both analog and digital signals during the transition.
The issue is still alive at the FCC, which has three new members, whose views on the subject are unclear.
Putting the onus on broadcasters, Sachs said TV stations need to use their free DTV spectrum in creative ways and shouldn't expect the cable industry to bump original cable programming to accommodate duplicative TV signals.
"The broadcasters' transition to digital has very little to do with cable carriage," he said. "It has to do with content and with broadcasters creating high-definition programming or other compelling content that would cause somebody to go out and spend $1,500 to $2,000 to buy a digital television."
The FCC is collecting data on cable operators' channel capacity, a move that perhaps lays the factual groundwork for an imposition of digital must-carry rules. The agency could argue that imposing dual must-carry wouldn't be an unnecessary burden on the speech of cable operators and programmers and would serve the important goal of helping TV stations make the transition to digital broadcasting — thus helping to recapture analog-TV spectrum for an auction that could yield the government billions of dollars.
Asked to assess the odds that the FCC might require dual must carry before 2004, Sachs said: "I don't handicap regulatory proceedings."
- Rate Regulation:
Cable rates—which have outstripped inflation in the aggregate in recent years, but have actually declined on a per-channel basis when adjusted for inflation—always keep NCTA's lobbyists on their toes. One House bill (HR 1842) calling for FCC reregulation has been introduced by Rep. Barney Frank (D-Mass.), but has generated only 15 co-sponsors. Rep. Bernard Sanders (I-Vt.) is expected to introduce a second bill that would authorize state regulation of cable rates.
When he visits Capitol Hill, Sachs said he routinely sounds out lawmakers on cable rates but seldom hears that cable subscribers are calling on Congress to reregulate the industry.
"We are not sensing that there is any fervor to reimpose rate regulation on this industry when cable rates have moderated under deregulation," Sachs said.