Bargaining with Cable

MSOs want broadcasters' DTV programming, but at what price?
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MSOs want broadcasters' DTV programming, but at what price?

JOHNSTON, IOWA: One of the functions of my position as director of engineering for Iowa Public Television is to act as the cable relation representative for our network. In Iowa we deal primarily with one large cable operator which is Mediacom, whose systems cover the majority of the state. There are a number of smaller independents owned by local phone companies and in a couple of the border markets we deal with other larger operators like Comcast in Omaha.

Cable relations for a PBS station in the analog domain are fairly simple. As a qualified non-commercial educational (NCE) station we are treated differently under the cable carriage than commercial stations. Since public funds are used to support the PBS network as well as the individual stations' federal appropriations and grants, neither the cable operators nor the stations have the right to deny any viewer the right to watch qualified public stations. Nor do we have any right to ask a cable operator to pay us to carry our signal. So we are not eligible for retransmission consent payments and we cannot be denied must-carry rights as long as we meet the technical requirements for providing a signal to the headend location.

Even in the border markets where there may be more than one PBS station, the size and capacity of the cable system generally requires that they carry all the stations. In the years that I have been doing the cable relations, I have never had a cable system argue to not carry our signal and there are a number of them carrying our signals well beyond the mandated range.

THE NEW REALITY

Of course in the DTV world the carriage requirements are not anywhere near so well defined. Consolidation in both the broadcast and cable ownership ranks has created large conglomerates focused more on debt management and generating profits than on service to their communities. At these companies' sizes and levels the first communities that their management must be sure are adequately served are the investors and shareholders. It is easy to lose track of the local communities' individual requirements and subtle differences when evaluating operational considerations from such great distances. During the this time of consolidation of systems there also has been a tremendous increase in the capacity that can be delivered to the home user as well as an expansion of the quantity of content sources available. In the vast majority of cases, the cable operator is in a sense a monopoly of sorts since most communities and cable operators negotiate exclusive franchise agreements. So here you have massive growth in service capacity, huge increases in the number of homes passed and essentially no competition in an environment in which the potential for long-term profitability is so bright that the operators need to wear shades. Unfortunately the shades in many cases blinded the operators to the need to deal with the growing dissatisfaction among their customers.

Doing cable relations for a statewide network like IPTV and previously for the essentially statewide CBS affiliates in New Mexico, I met with many cable operators and their customers. Working with viewers to sort out problems I often heard tales and experienced treatment from cable operators that reminded me of Lily Tomlin's character of Ernestine the Operator on "Laugh-In" whose response to complaints was to snort and laugh and quip that they were the phone company and they didn't need to care. Many cable operators in my experience have this same attitude.

Of course that is changing now because of market forces... sort of. The satellite industry through technological advances has been able to offer competitively priced services to compete with cable. Through their government-forced benevolence they now also offer carriage of some local stations in many markets that makes them even more attractive to end users. No longer do they need a 10-foot satellite dish in their back yard, they can receive their local network affiliates and since the cable companies have been treating them like a necessary evil, the opportunity to break free is very appealing.

The cable industry is now on a campaign to improve its image and you can see it in their promotional spots as they tout their local presence, their contribution to the communities by employing local people and contributing to the local economy. They justify rate increases as the result of having to pay more and more to the content creators so that they can supply the viewers with this vast array of services. And now that they have a true competitor they are looking for ways to differentiate themselves from that competitor.

One big interest is local HD broadcasts. We began broadcasting on three of our nine DTV sites in early August. Since we are currently building out our fiber interconnect system and will not be implementing our ACE master control solution until late January of next year, we are limited in how we can run our DTV transmitter streams. Within a few days of being on the air in HD, I was contacted by cable operators wanting to know what arrangements were needed to obtain our permission for carriage of our HD content. Local HD content from both the commercial and NCE stations is a service that cable can offer viewers that satellite cannot. However, we have been giving this matter considerable thought literally for years. IPTV wants our complete bitstream carried regardless of whether we are broadcasting in HD or multicast SD and datacasts. As we have planned our future in the digital broadcast realm, each of these facets of operation has a crucial role in our service to Iowans and we are unwilling to negotiate away any service.

GOT WHAT THEY WANT

I don't know how easy it will be to work out an acceptable carriage arrangement but we have considered a number of the arguments that we heard from cable. The cable operators want to carry our HD and initially we are planning on airing exclusively HD only; our infrastructure is still not ready to handle the complexities of multicast switching and such. However, since we know from our own tests that we can do all of the services within the ATSC broadcast stream, and since cable is ready and willing to carry our HD content, even if it takes up the entire ATSC stream, we don't buy the capacity argument since implementation shouldn't require any change in capacity regardless of what we are doing with our content. I'm sure there are technical challenges to be dealt with but the number of bits used is constant and therefore capacity isn't a real issue. In our multicast environment we plan on offering multiple free services and we want them available to all Iowans through whatever means they receive our digital signal. We plan on using addressable datacast technology to supply multimedia content to K12 schools so that they do not have to wait for a van to deliver a VHS tape. Since the majority of schools have cable already, if this service cannot be delivered by cable, the schools would have to install antennas which can be done but puts an unnecessary burden on them. If we were to offer any premium service that required some sort of subscription from which we would profit and the end-user is using the cable pipe to receive that service, we would negotiate a payment plan to cable for carriage. But that is not what we're about.

One cable operator wants access to our library for a video-on-demand type service. We have a considerable library of Iowa-centric content that sits on shelves and gets played occasionally. Potentially it could be a tremendous service to offer to Iowans in their homes and schools for research and entertainment. For the cable operator it provides them with another differentiated service from satellite that they can promote. If you do any in-depth investigation you'll find that a significant percentage of VOD or PPV services that are purchased are pornography and not something that the cable operator can promote openly. It may be hypocritical for them to offer a service that many in the communities they serve would decry if they promoted it, but then again the cable operator is in the business for profits and if members of the community weren't purchasing the service they'd pull it in favor of something more profitable.

So, we are just starting down this road and although we're not certain how smooth the trip will be or how long it will take, we believe in the end we'll end up getting full carriage because we have products in these critical areas that our communities want that our cable partners can promote and deliver with pride.