WASHINGTON, D.C., July 24, 2012 - American Cable Association Chairwoman Colleen Abdoulah, testifying before the Senate Commerce Committee, called on Congress to modernize the Cable Act of 1992 in response to skyrocketing pay-TV bills, a spike in TV signal blackouts, and chronic anti-competitive business practices by media giants set against a backdrop of unparalleled media consolidation and rapid technological change linked to the spread of broadband Internet access.
Abdoulah, Chairwoman & CEO of WOW! Internet, Cable and Phone, argued that because current market conditions in no way reflect the assumptions of the period when the Cable Act of 1992 was passed, Congress needed to draft new rules of the road to address the impact of new technology and the well-documented harms inflicted on consumers by broadcasters and others that can exploit their market power and regulatory advantages with impunity.
"The 1992 Act lags behind profound technological developments and business innovation. As a result, outdated laws applied to a rapidly changing marketplace create serious problems for consumers," Abdoulah said in her prepared statement. "It's clear the time for Congress to act is now."
Committees in the both the House and Senate are holding hearings this year on video-related laws and regulations as a prelude to next year, when key lawmakers are expected to introduce bills designed to address problems with retransmission consent, access to competitively significant content and the treatment of online video distributors.
Focusing on the broken retransmission consent market, Abdoulah noted that TV stations have staged 69 signal blackouts so far in 2012, up 35% from the previous year and affecting tens of millions of consumers in dozens of markets. She added that more than 800 cable systems have been shut down since 2008 for reasons that include runaway retransmission consent and cable programming fees that can't be passed along to consumers.
Abdoulah explained that the Federal Communications Commission is equipped to respond to some of TV stations' more flagrant anti-competitive practices. She was referring in particular to situations where separately owned TV stations within the same market appoint a single agent to negotiate retransmission consent with ACA Members and other MVPDs.
Broadcaster collusion of this kind, Abdoulah said, has been documented to drive up the wholesale cost of retransmission consent by at least 21%, compared to stations that negotiate on their own behalf. ACA has asked the FCC to rule that in relevant cases, TV stations that coordinate their retransmission consent are violating the agency's requirement to negotiate in good faith and its ban on the ownership of more than one top-four rated station in a market.
"Our hope is that Congress will find a way to convince the FCC to act or will itself prohibit this practice in making revisions to the Cable Act," Abdoulah said.
To being to fix retransmission consent and restore parity between TV stations and MVPDs, Abdoulah offered several ideas for Congress and the FCC to consider:
Abdoulah explained that retransmission consent was born when TV stations bargained with a single cable company. But that assumption, she said, has not survived the arrival of DirecTV, Dish Network, wireline video services of AT&T, Verizon, and CenturyLink and online distributors Netflix and Hulu. Meanwhile, MVPDs have access as before to only one ABC, NBC, CBS and Fox affiliate in a market. With the leverage on broadcasters' side, TV stations routinely seek outrageous increases in retransmission consent fees. In WOW's case, fees are up 90% year-over-year.
"Today, the MVPD still needs the Big 4 signal on its channel line-up just as much as before, but, unlike in 1992, the broadcaster no longer needs any single MVPD quite so much. In my situation, I know, and my local broadcaster also knows, that if I do not carry its signal my customer will easily go to one of my competitors to get it," Abdoulah said.
Other forces are putting upward pressure on retail pay-TV rates, especially sports programming carried by NBC, CBS and Fox and cable networks ESPN and NFL Network. Abdoulah said programmers with market power coerce MVPDs to distribute unwanted channels on the same programming tier with the most popular channels, which effectively denies MVPDs the ability to offer consumers multiple programming packages at different price points.
"Growing media consolidation by the large networks and programming owners has led to rampant tying and bundling of unwanted, unwatched and unmarketable programming," Abdoulah said.
About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.4 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit http://www.americancable.org/
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