Tier Law? No Way


The debate over tiering expensive cable networks continued to be waged last week, with the head of the largest cable trade group coming out against federally mandated a la carte networks.

"We don't think there is a regulatory one-size-fits-all solution here," Robert Sachs, president of the National Cable & Telecommunications Association, told reporters here last Wednesday. "We think if companies go to Congress to resolve their differences, there is always the law of unintended consequences, and we would oppose legislation in this area."

While Sachs denounced government-enforced tiering of networks, at an industry conference last week Comcast Corp. CEO Brian Roberts said more "optionality" for consumers is practically unavoidable — though preferably not by government fiat.

Roberts, head of the largest U.S. MSO with nearly 22 million subscribers, did not advocate government intervention. In fact, he took the opposite tack, stressing that the industry should resolve its own conflicts. But he was in favor of tiering as a concept, particularly for sports programming.

"Optional services — how can that be a bad thing?" Roberts said at a Banc of America Securities LLC media conference in New York. "There is some level of costs that everybody should have to bear if they're not enjoying the product.

"When you get to a certain level, the debate goes, should there be some optionality? I don't see a lot of downside."

Roberts said the transition period to sports tiers could be painful, but used Cablevision Systems Corp.'s highly public fight with the Yankee Entertainment & Sports Network as an example. Earlier this year, Cablevision reached a one-year deal with YES that allows the MSO to place the network on a tier.

"I think that was a very big event," Roberts said of the Cablevision-YES deal. "They were not carrying a very popular program and they only lost about 50,000 out of 3 million customers.

"Not carrying the New York Yankees in New York post-9/11 is almost unthinkable. They won the right to make this service optional to the consumer. Long-term, it changes the business model. Clearly, they enjoy flexibility that other cable operators don't have."

Insight Communications Co. CEO Michael Willner, speaking at the same conference, said that he didn't believe there was a lot of momentum in Washington for further cable regulation.

"I do not have a sense at this point in time of a lot of traction in Congress for a bill to be introduced and passed that would result in a regulatory solution," Willner said. "I don't believe that in general, programming costs are out of control. I think there is a specific piece of the programming pie where the model is broken — in particular, sports is one of them.

"I don't particularly blame programmers for that. It goes all the way up the food chain," Willner added. "That has to be dealt with on a business-to-business basis."

Willner also warned operators, once again, that seeking Washington's help might get them more than they bargained for.

"I would like to deal with it in negotiating with programmers," Willner added. "I think that's a much more effective way of getting the right outcome for consumers than in going to Washington, who will clearly pass laws that will have unintended consequences, as every law that they've passed has. I'm not a proponent of going to Washington about this at all."

Earlier in the month, Cablevision chairman Charles Dolan testified before the Senate Commerce Committee that Congress should consider barring programmers from demanding carriage on the most widely penetrated tier.

While denying support for legislation, Cox Communications Inc. CEO James Robbins told the panel he favored removing from expanded basic any network that costs him more than $1 per month, per subscriber.

ESPN, which insists on expanded-basic carriage, denounced à la carte and sports tiers as anti-consumer.

The NCTA, which represents both MSOs and programmers, has a longstanding policy that warring operators and programmers should settle their problems in private, without seeking the help of government.

"Washington is not a venue to resolve business issues," Sachs said.

On a related subject, Sachs said he expects the Federal Communications Commission to return to cable-ownership issues in June, following completion of the hotly contested broadcast-ownership rulemaking. Under a court order, the FCC is reconsidering a rule that limited one cable company from owning more than 30% of all U.S. pay-TV subscribers.

The FCC's release of new cable-ownership rules has been delayed for months.

Other operators have advocated the abolition of FCC retransmission-consent rules that they say give broadcasters that own cable networks an unfair advantage.

Last week, Roberts hedged when asked whether he favored abolishing retransmission consent.

"There is not an operator that thinks that retransmission consent isn't the worst law ever written," Roberts said. "It's a close call if we should be required to carry some broadcasters and negotiate carriage with others. We've learned to live with it. I'll leave it to others to say it has outlived its usefulness."