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Cable Lobby Calls Retrans Gains ‘Borderline Obscene’

The lobbying group representing small cable operators this week ramped up its criticism of broadcast retransmission fees, saying that recent retrans revenue gains “ranged from truly excessive to borderline obscene.”

Calling the retransmission consent process—the fees that broadcasters charge local cable operators to carry their signals—“broken,” the American Cable Association put the blame for rising cable bills squarely on broadcasters.

“When cable customers want to know why their bills keep going up, all they need to do is look at how TV stations exploit retransmission consent to squeeze every penny they can from pay-TV providers, especially ACA’s amll independent cable companies,” ACA president and CEO Matthew M. Polka said. “Not only do these excessive carriage fees drive up the cost of subscription TV, but small cable operators then have less money to invest in their networks to deliver more channels in HD, faster broadband Internet speeds and advanced phone services with multiple low-cost features.”

ACA singled out specific broadcast groups which recently released quarterly earnings—all of which showed a decline in overall revenues. The association noted that Journal Communications reported a “whopping” 333.3 percent gain in retrans consent revenue, with a total of $1.3 million, followed by Hearst-Argyle Television, with a rise of 97.8 percent to $12.4 million; LIN TV, whose retrans revenues increased 82 percent to $8.8 million; Belo Corp, up 10 percent to $9.7 million, and Sinclair Broadcast Group, which reported a 7.5 percent increase, to $21.1 million.

ACA said that current rules that allow broadcasters to distribute popular network programming within their markets and demand payment from pay-TV operators to carry such programming allow them to make “take it or leave it offers,” particularly against operators with a minimal presence in their market.

The association says that it has urged Congress to review the impact of increasing retrans agreements on the cable TV industry but acknowledged its immediate interests lie in ensuring its members gain access to $7.2 billion in grants and loans from the economic stimulus package to improve nationwide broadband deployment.

“Congress expressed its desire not to address retransmission consent as part of this year’s Satellite Home Viewer Act (SHVA), reauthorization, and ACA will respect that wish and not push for Congressional action in 2009,” Polka said. “However, long term ACA remains committed to finding a solution to this problem.”

NAB responded to ACA's claims by pointing to a recently released study, which details how several cable operators' gross profits increased from $48.96 per subscriber per month in 2003 to $62.99 per subscriber per month in 2006, an increase of $14.03 per subscriber per month. During the same period, cable operator's programming expenses per subscriber per month increased from $16.63 to $18.47, an increase of just $2.84 per subscriber per month.

"With cable's profits rising five times as much as their programming expenses, it is absolutely illogical to claim that retransmission consent plays a significant role in the continued escalation of cable subscription rates," said Dennis Wharton, executive vice president, who added that, according to the study "retransmission consent fees account for only two tenths of one percent of cable revenues today, and industry analysts predict they will never rise about one percent."

Polka disputed the worth of that study.

"The ‘study’ is based on data that the NAB collected from four large publicly traded cable operators that each serve many millions of customers. Because no ACA member was included in the portion of the NAB study that compared programming costs to profits, it's an irrelevant response to ACA’s May 7 release that documented excessively large retransmission consent gains by several local TV station groups," he said.