Not surprisingly, yesterday the NAB and several major networks fired both barrels at the cable industry in response to that wired industry’s March 9th letter to the members of congress. Calling the letter “a highly misleading campaign,” the NAB attempted to refocus the discussion to what NAB calls the “free marketplace.” A now more common phrase in these circles is retransmission consent.
At the heart of the matter is cable’s desire to seek a government-mandated right to carry broadcast signals for free. Even though, as the NAB points out, cable competes head-to-head with broadcasters and itself gains enormous economic value from carrying OTA broadcast signals.
Calling retransmission a marketplace benefit, the NAB stated that retransmission consent has led to more program diversity — more local news, more local weather, more sustainable support for broadcasters’ purchase of millions of dollars of programming on the open market for their local audiences. “Congress should follow the recommendation of the expert agency and let the marketplace work,” the organization said.
In 1992, Congress adopted the retransmission consent principle to provide broadcasters with the opportunity to negotiate with those wanting to retransmit their signals. The retransmission consent principle made possible a marketplace where cable operators and stations could bargain freely. Congress retained a must-carry requirement for public, minority and niche stations that it feared cable would otherwise refuse to carry out of a monopolistic desire to reduce competition.
The NAB claims that the cable industry now seeks legislation to bar such arrangements. The March 9 letter also argues that retransmission consent negotiations are not fair because of broadcasters’ exclusivity rights. The broadcaster viewpoint is that geographic exclusivity, which is limited by the FCC’s rules to narrowly define geographic zones near stations’ home communities, is actually pro-competitive because it strengthens local stations’ ability to compete against the hundreds of non-broadcast and non-local programming networks offered by cable and satellite.
The commission completed a report five months ago on retransmission consent. Cable’s letter suggests that the FCC’s Report to Congress was sympathetic to the cable industry’s concerns about retransmission consent. However, the report actually stated, that cable’s arguments should not “be properly considered within the scope of our examination”, the said NAB.
The organization also said cable’s letter contains other misstatements and distortions including: retransmission consent leads to “higher consumer bills.” As the broadcasting organization notes, the continuing escalation of cable’s prices to consumers has occurred when virtually no broadcaster received any retransmission consent payments. Continuing a long history of rate hikes far in excess of inflation, cable rates increased 7.8% in 2002 and 5.4% in 2003.
The FCC’s report found in 2004 that cable operators charge their subscribers more than $14 per month for just a basic tier that consists largely or entirely of broadcast signals.
One major cause for escalating cable rates has been the increasing consolidation of the cable industry. Studies by the Government Accountability Office, the FCC and the Consumer Federation of America all have found that consumer cable prices are driven by (not surprisingly) a lack of competition. The GAO and FCC found that national consolidation and clustering have increased cable prices to consumers by more than 5 percent. Other studies have confirmed that cable rates drop where there is competition between service providers.
While it’s true that broadcasters “derive enormous value from carriage,” so does cable from carrying those broadcast signals. Despite having perhaps hundreds of channels from which to choose, cable subscribers still spend more than 40 percent of their time watching broadcast signals.
As new competitors are appearing on the horizon, some elements of the cable and satellite industries continue to seek protection from the marketplace through misleading notes to capital hill like the March 9 letter, said an NAB press release.
Looks to me like NAB’s new leader just blasted a hole in many of Cable’s claims. Let the battle continue.
