Broadband Cable Association of Pennsylvania


July 24, 2012

Few issues make constituents write to members of Congress like losing access to their favorite TV or cable shows and, up until now, lawmakers have been all talk and no action. But a backlash to the blackouts may be coming.

In a series of hearings in the House and Senate, lawmakers are starting to look at video industry regulations and whether they need to be updated in the age of mobile devices, online video and cord cutters. The Senate Commerce, Science and Transportation Committee will hold a hearing Tuesday on the 20-year-old Cable Act governing video services, and the polarizing views about what is and what isn't wrong with the law will be on full display.

On one end of the spectrum, Sen. Jim DeMint (R-S.C.) wants to deregulate cable and satellite providers, putting an end to government's involvement in how broadcasters and pay-TV operators negotiate payments for carrying programming. "We should remove unnecessary government interference from a mature and increasingly competitive video marketplace," DeMint told POLITICO. On the other side, Sen. John Kerry (D-Mass.), chairman of the Communications, Technology and Internet Subcommittee, sees a need for only minor revisions to protect viewers who want their MTV - and other programming. "Playing games of chicken during college bowl games, the World Series or the Oscars just seems like it's the new norm," Kerry said. "Can't we do better than that?"

New players and new technology have transformed the video-industry-leading lawmakers to question the relevance of the laws that govern it. The Commerce Committee will hold its second video hearing of the season on Tuesday. And the House Energy and Commerce Committee has been calling the major players on the carpet for a public discussion on the intersection of video consumption and the law.

Cable, broadcasters, satellite and the new over-the-top gang - Netflix, Hulu and Aereo - are battling for market share with technology-driving market convergence. Consequently, lawmakers are assessing whether decades-old communications regulations over "retransmission" payments from cable, satellite and other video services for access to TV and other programming need to be updated to fit today's reality. Industry players are quick to point fingers at each other - blaming each other for rising prices and blackouts. "We are hopeful members recognize that if you eliminate the [retransmission] revenue stream, that local broadcasting's funding source will be threatened," said Dennis Wharton, spokesman for the National Association of Broadcasters. Broadcasters say blackouts represent a small fraction of these negotiations over program carriage. "Three companies are bankrolling the campaign - Time Warner Cable, DISH and DirecTV," Wharton said. "They are manufacturing the illusion of this crisis, when they are not wanting to pay a fair market rate for the programming."

Many in the cable industry see the retransmission rules as having become "exactly what it was never intended to be: a subsidy for the national broadcast networks and their affiliated cable channels rather than a source of support for local broadcasting," according to the advance testimony of Melinda Witmer, Time Warner Cable's executive vice president and chief video and content officer, who will testify at the Senate hearing on Tuesday.

The American Television Alliance - which represents DISH, Time Warner and DirecTV, among other pay TV providers - issued the following statement: "The facts are clear - blackouts are becoming increasingly more common with tens of millions of viewers having been harmed by broadcasters pulling the plug. It's only July, and we've already seen 69 blackouts to date, up 35 percent from all of 2011." Under current law, broadcasters can require satellite and cable operators to carry its signals - the so-called must-carry provision - or negotiate a retransmission consent fee. Compulsory licenses, enacted in the 1970s as part of copyright legislation, grant satellite and cable operators the right to local TV broadcast programming for free, further complicating the matter.

To repeal the retransmission consent (which deals with the broadcasters' signal) - and not the compulsory licenses (which deal with broadcasters' programming) - would leave TV broadcasters at a crippling disadvantage, said Preston Padden, a Colorado Law academic and industry veteran who will testify at the hearing Tuesday. DeMint's bill, the Next Generation Television Marketplace Act, would ax the central tenets of industry regulation including retransmission consent, compulsory licenses and must-carry for commercial broadcasters. Rep. Steve Scalise (R-La.) has introduced a companion bill in the House. "We can allow broadcast programming creators and video distributors to negotiate for carriage without the imposition of government and not be locked into last century's television model," DeMint said, arguing for government to protect property rights and competition but not favor particular business models.

If DeMint assumes a leadership role on the Commerce Committee, a distinct possibility for the next session of Congress, he plans to move forward quickly on this measure. Kerry, however, would prefer to tinker around the edges and rejects fundamental reform. "I will not support radical proposals to eliminate retransmission consent rights or must-carry requirements altogether because without them local broadcasting could not sustain itself," Kerry said. The Massachusetts lawmaker is primarily concerned with failed carriage negotiations that end in TV blackouts. Kerry wants to "shield consumers from unfair treatment or being abused as pawns in negotiations."

The Federal Communications Commission, which has come under pressure intermittently to help mediate carriage negotiations, declined to comment for this article. But the FCC has recently shown a lack of willingness to intervene in blackouts over retransmission disputes absent a new law granting the agency more authority in this arena. For all the palace intrigue about the changes in the video industry, some don't believe that regulatory change is forthcoming. "I don't believe there is likely to be any congressional or FCC action that changes the fundamental framework," said Blair Levin, principal author of the National Broadband Plan and a telecommunications veteran. For this year, on the Hill, the interest in the video market, which has been revolutionized by the Internet and portable electronic devices, is unlikely to translate into quick legislative action. There isn't a political imperative to move forward on it yet, key lawmakers disagree on an approach to reform and the issue divides industry in ways that are difficult for lawmakers to reconcile.

Video legislation "probably won't move this year simply because of the floor schedule," Commerce Committee Chairman Jay Rockefeller (D-W.Va.) said last week. DeMint doesn't expect any action until next year. A House Energy and Commerce Committee spokeswoman also conceded that the opportunities to move legislation are "limited" this year. POLITICO is an affiliate of Allbritton Communications Co., which is an active member of the National Association of Broadcasters. Politico