Time Warner Cable: Retrans Never Has Been Free Market

MSO Programming Chief Witmer to Senate Commerce: It's Time to Let Marketplace Really Decide

Retransmission consent is one of several special privileges given to broadcasters by the government, but it is also part of a "thicket of outdated regulations," and a broken system that needs fixing.

That was the message from Time Warner Cable retrans negotiator Melinda Witmer, according to her written testimony for the Senate Commerce Committee's highly anticipated July 24 hearing on the Cable Act at 20.

She pointed out the law, enacted despite a presidential veto, was an effort to promote competitive alternatives to cable, and was not meant to have a shelf life beyond achieving that goal of competition eventually replacing regulation. "This was made clear in the Act's Statement of Policy, where Congress expressed its preference "to rely on the marketplace" rather than regulation wherever feasible."

Cable operators, which in 1992 claimed a 95% share of the MVPD business, are at about 58% today, she said, and face even more competition from new platforms such as online video.

She also wrote that Congress' goal in the Act of encouraging cable to build out service and bulk up programming has been fulfilled, with billions of dollars of investment in new services like VOD and 3D and DVR as well as high-speed Internet and phone service.

Given those market realities, according to Witmer, it is time for some of the Act's provisions to be overhauled, with retrans first on the list. "Contrary to broadcaster assertions, retransmission consent is not now and has never been a free market."

TWC is a member of the American Television Alliance, a group of cable operators, satellite companies and others that petitioned the FCC a couple of years ago to revamp its retrans rules, including by requiring outside arbitration and preventing signal black-outs during retrans impasses. The FCC opened a proceeding, sought comment, and made some recommendation, but has not acted on the 2011 proposals. The FCC's chairman has said publicly the FCC's authority is limited.

Witmer laid some blame at the feet of the commission for underestimating its authority to step in. "Unfortunately, the FCC has adopted a narrower interpretation of its role in overseeing the retransmission consent process," she wrote, "and the agency's inaction, combined with broadcasters' ability to play competing MVPDs against each other, has been a key cause of the brinksmanship tactics (or take-it-or leave it demands) that now characterize the broadcasters' approach to retransmission consent negotiations."

While broadcaster witnesses for the hearing argue that it is MVPDs that hold up deals in part to make a public
point about a broken system, Witmer says it is broadcasters holding up deals because they know MVPDs don't have any recourse.

Armed with a chart of the cable nets co-owned by broadcaster parent companies, Witmer illustrated her point: "MVPDs today do not have the choice of 'paying a little less' for non-broadcast programming to cover their growing retransmission-consent expenses. The very broadcasters that are demanding increased retransmission-consent fees own the non-broadcast cable channels and are not about to lower the amounts that they are paid for those."

While TWC last week settled its retrans dispute with Hearst, Witmer cited it in her testimony anyway. "Earlier this month, over two million of our subscribers lost access to broadcast signals when we would not cave in to Hearst Broadcasting's demands for huge fee increases," she said "While our dispute with Hearst has been settled, the fact remains that our customers are being asked to shoulder ever-increasing rates resulting from each and every retransmission consent negotiation, even those that do not result in a public dispute."

TWC faces yet another potential dispute. The latest could involve a handful of Meredith stations. On its website, one of those stations, KCTV Kansas City, said that it could go dark on the Time Warner Cable system at midnight July 25.