Small cable companies who say broadcasters are charging “extortion rates” to carry their programming are in town this week seeking sympathetic ears on Capitol Hill.
Local commercial television stations can either classify themselves as “must-carry” channels that cable operators are required to run, or they can negotiate retransmission consent agreements with cable providers, usually in exchange for cash. In the latter case, however, cable operators can refuse to carry the channel if no agreement is reached.
Unlike large cable firms, small and often rural operators say they lack sufficient leverage to negotiate with TV stations. As a result, independent operators say, they are forced to pay margin-squeezing prices or let the channels go dark, in which case customers could migrate to satellite TV.
“There’s really very little room to negotiate,” said David Baum, president of Jet Broadband, which serves 200,000 customers in 11 states including Virginia. “Dropping a broadcast channel is not an option.”
Mr. Baum’s company is one of 1,100 operators represented by the American Cable Association, whose members serve a total of 7 million cable subscribers. The nation’s largest cable company, Comcast Corp., serves 24.1 million cable customers.
Retransmission fees, set every three years, are charged per month, per subscriber. Rates for large cable companies range between zero and 20 cents, compared with a range of 50 cents to $1 for smaller operators, according to an ACA spokesman.
ACA members, in Washington for the group’s annual summit, plan to meet with about 150 lawmakers today. Meanwhile, the National Association of Broadcasters is running an ad in papers this week defending the current regime.
“Cable gets the programming its consumers demand and broadcasters can negotiate for fair compensation,” the NAB says. “Oppose the cable monopolies’ attempt to undermine the current process and create an unfair advantage for cable in private, market-based negotiations.”
In other FCC news …
The media-regulating agency faces House lawmakers Tuesday in an oversight hearing of its recent sale of public airwaves. The auction, which raised more than $19 billion, included an “open access” requirement that the winner of a nationwide license would allow any device to operate on its network.
While Verizon Wireless ended up spending $4.7 billion on that chunk of spectrum, AT&T last week cited the added requirements as a disincentive for bidding on the block, instead snatching up $6.6 billion’s worth of regional licenses. Some say that move harmed smaller companies that may have planned on buying those licenses and competing with larger carriers.
“The law of unintended consequences ruled the day in an effort to impose openness on a market that was already headed in that direction,” FCC Commissioner Robert M. McDowell told Channel Surfing when asked about the auction results. Mr. McDowell, a Republican, issued his first partial dissent at the agency over the open-access rules. “The early evidence shows smaller players got squeezed out and paid the price.”
In addition to probing the auction’s winners and losers, lawmakers surely will focus on the failure of the so-called D block of public safety spectrum to attract a high bidder.
• Channel Surfing runs on Wednesdays.
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