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FCC Comments regarding Wholesale Unbundling

Submission Date: 

These comments address the following four areas:

  • The current wholesale market for satellite programming and retransmission consent from the perspective of small and medium-sized cable companies.
  • The harms caused by current wholesale practices of programmers and broadcasters.
  • The minor adjustments to Commission regulations that would mitigate the harms of current wholesale practices.
  • Sample channel lineups from small and medium-sized cable companies showing how they would offer consumers a diverse variety of innovative channel offerings, if the Commission adjusted its regulations as requested here.

In short, these comments demonstrate how the problems with choice and cost at retail spring from the wholesale practices of powerful programmers and broadcasters. Positive change will require Commission action.

In preparing these comments, we asked a representative sample of ACA members to provide information about the wholesale programming and retransmission consent market. The sample covers hundreds of cable systems operated by a wide variety of companies, ranging from third-generation family-owned businesses operating single cable systems to medium-sized cable companies operating systems in several states. We asked companies to report their experiences in obtaining distribution rights for satellite channels and broadcast channels and the impact of those transactions on their retail offerings.

The responses reveal widespread tying, bundling, distribution restrictions, and price discrimination. The responses show how the wholesale practices of powerful media conglomerates sharply restrict retail choices while substantially increasing retail costs. In turn, these wholesale programming and retransmission consent practices harm video competition and impede broadband deployment.

Current wholesale practices harm the public interest and conflict with key communications policy goals. The Commission should act to alleviate these harms. These comments propose limited adjustments to existing regulations. The regulations would, in a restrained and measured manner, begin to mitigate the harms of current wholesale practices and help foster an exciting new era of innovation and choice.

We organize these comments as follows:

  • Section II describes in detail current wholesale programming and retransmission consent practices from the perspective of ACA members.
  • Section III explains how current wholesale practices cause substantial public interest harms.
  • Section IV describes the proposed regulations. Appendix 1 contains the text of the regulations. Appendix 2 summarizes Commission authority to adopt the regulations.
  • Section V contains eight examples of how different ACA members would offer programming if current wholesale practices were reformed. These channel lineups show how ACA members are prepared to offer consumers more choice, value, and control.

A note about retaliation by programmers and broadcasters. Nearly all programming and retransmission consent contracts contain strict nondisclosure terms imposed by the programmer or broadcaster. In responding to the Commission's questions concerning wholesale practices, ACA members fear the risk of retaliation by certain programming suppliers. Conglomerates like Viacom, Disney, Fox, NBC Universal, and others have many weapons, both overt and subtle, with which to hurt smaller distributors. No small cable company alone can support a fight against any of these companies. Consequently, these comments must remain guarded in reporting certain information.

The specific information ACA members cannot disclose for fear of retaliation is readily available from programmers and broadcasters. The Commission should request this information, especially fees for purported standalone channel offerings compared to fees for bundles. Similarly, the Commission should obtain information concerning the differences in fees that programmers and broadcasters charged small and medium sized cable companies compared to the fees paid by large MSOs and DBS providers. If programmers and broadcasters resist, the Commission has authority under Section 403 to investigate and demand disclosure of this information.[1]

The American Cable Association. ACA represents over 1,100 small and medium-sized cable companies. This constituency includes an incredible variety of businesses - family-owned companies serving small towns and villages, multiple system operators serving predominantly rural markets in several states, and hundreds of companies in between. All of these diverse companies share four characteristics important here:

  • Each company must purchase most of their satellite programming from a small group of media conglomerates.
  • Each company must negotiate with major networks or affiliate groups for retransmission consent.
  • Each company faces contractual restrictions that often eliminate flexibility in how local cable systems can package and distribute programming.
  • Each company pays substantially higher programming rates solely because of non-cost-based price discrimination.

As a result, ACA members are well-positioned to describe for the Commission the harms of current wholesale programming and retransmission consent practices and what the Commission needs to do to rectify these problems.

[1] 47 U.S.C. § 403 ("The Commission shall have full authority and power at any time to institute an inquiry...concerning which any question may arise under any of the provisions of this chapter....").

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