Sweeping Retrans Reform Unlikely: McSlarrow

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New York - Cable operators shouldn't expect any meaningful changes to retransmission-consent regulations in the near term, two top Washington players said at an industry conference here Thursday.
National Cable & Telecommunications Association CEO Kyle McSlarrow and Federal Communications Commission Media Bureau chief Bill Lake, speaking separately at the SNL Kagan Cable MSO Summit here, said that despite the hype surrounding retrans - and a series of recent hearings in Washington - the FCC just doesn't have the power to change the law.
"Realistically, it's going to take a while for any fundamental reform in retransmission consent," McSlarrow said. He added that the recent battle between Cablevision Systems and Fox Networks and hearings earlier this week regarding U.S. Sen. John Kerry's (D-Mass) proposed retrans reform bill has sparked greater interest in the debate than he has seen during his tenure as head of the NCTA.
"Part of the problem," McSlarrow added, "is that it's hard to go in and pull out the retransmission-consent part of a very, very complex regulatory regime. ...Until Congress really decides whether or not they are going to take a broader look at telecommunications, a broader look at the relationship with the broadcast industry, cable, satellite and telephone now, I think it will be hard. Now that is not to say it is impossible."
Lake said later the Kerry bill does call for amendments to the 1994 Cable Act which created retrans, but some Senators, including Commerce Committee chairman Jay Rockefeller (D-W. Va.), have said that it was time to look at other issues as well, including cable rates and ala carte.
"That makes legislation in the near-term even less likely," Lake said. "But it also makes clear that we're not talking about the possibility of rifle shot retrans consent legislation, we're talking about this being one more factor that might move congress to do a more thorough review of the legislation that exists.
Lake also referred to FCC chairman Julius Genachowski's letter to Kerry stating that the agency has no real authority to force mandatory arbitration or carriage. But he added there may be some way for the FCC to exert more influence - he added that some cable operators have suggested that retransmission consent isn't really a free market transaction because the rules favor broadcasters.
"One possibility will be for us to look at those rules and say, ‘We're now in a straddle position where its partly a market transaction and partly a regulated transaction, is there a way for us to deregulate the transaction further so it would be strictly a market phenomenon like negotiating for cable channels,'" Lake said. "We haven't decided whether to issue a notice or when, but we expect to reach a judgment sooner rather than later."
But Lake said that broadcasters and cable operators should not enter their next negotiations thinking that the FCC will intervene.
"One thing we have done is to make it clear that nobody should be hoping for mandatory arbitration or carriage order from the commission," Lake said. "We don't want [people] on the cable side to be holding out on the hopes that the FCC will come riding in on a white horse to save the day."
McSlarrow also commented on the other hot topic of the day, cord cutting. While McSlarrow said that there is little evidence that cable customers are dropping their subscriptions in favor of watching programming for free over the Internet, it is not something the industry is ignoring.
"No one is sticking their head in the sand" McSlarrow said. He noted that while a steady decline in cable subscribers has fueled the cord cutting debate, the industry doesn't get the credit it deserves for its gains in high speed data and phone customers. He estimated that cable has lost 1.7 million basic video customers year-to-date, but gained 1.8 million high-speed data customers and 1.3 million phone subscribers. And with its broadband dominance and initiatives like TV Everywhere, cable is in a position to take advantage of over-the-top video.
"Our mix of services is evolving," McSlarrow said. "I don't view [over-the-top] as a threat if we're smart about it and take the steps to embrace it. We will embrace the alternative of over the top video as a complement to our service. If we fight it, then we're putting the consumer with the choice of substituting it. ...We know there is going to be video on the Internet, let's figure out a way to deal with it and grow."

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