TV Executives Debate Retrans Rules in Congressional Hearing

As retrans disputes cause more and more blackouts of channels, industry insiders appear before the Senate to debate whether the rules for carriage of TV stations need to be rewritten.

On Tuesday, the U.S. Senate Committee on Commerce, Science & Transportation held a hearing on "The Cable Act at 20," referring to the law enacted two decades ago that governs the rules by which pay cable operators carry local broadcast channels. The discussions come after high-profile disputes on the retransmission front that have caused attention-getting blackouts in recent months.

Several top executives at media companies came with with prepared remarks expressing vehement disagreement on whether the law that defines the modern TV industry needs to be updated.

Melinda Witmer, executive vice president and chief video and content officer at Time Warner Cable, took dead aim at retransmission consent, which she says is "now harming consumers" and has become a "subsidy for the national broadcast networks...rather than a source of support for local broadcasting."

Referring to disputes that have caused broadcasters to be at odds with pay TV distributors, Witmer says that the original goal to "ensure the universal availability of local broadcast signals" is no longer being promoted by giving broadcasters the rights to negotiate fees for carriage.

"Retransmission consent negotiations are characterized by the broadcasters’ demands for massive fee increases backed by blackout threats, and the incidence of actual blackouts has spiked as broadcasters increasingly have demonstrated their willingness to withdraw retransmission consent to increase their bargaining leverage," testified Witmer, trotting out the statistic that there was 12 disputes in 2010 and 51 disputes in 2011. "So far this year there have already been 69 blackouts...This is not what Congress intended or expected."

Witmer also noted the FCC has adopted a narrow interpretation of its role in overseeing the "brinkmanship tactics" she says she sees in the retransmission process.

Martin Franks, executive vice president of planning, policy and government relations at CBS Corporation, gave the other side in prepared testimony.

"I believe that the retransmission consent regime enacted in 1992 is actually one of the great Washington public policy accomplishments of the intervening two decades," he said. "It has given renewed vitality to broadcast television that prior to 1992 was being consigned to the dust heap of history."

Franks continued on by saying that calls to eliminate the retrans consent rules were off-base. "That there are some calling for a return to the old regime, when they got their most popular product for free, and then resold it and used the proceeds to build their own businesses, is hardly a surprise," he said. "Congress should resist those entreaties, especially since retransmission consent is not broken."

As evidence, Franks pointed to some 15,000 retrans consent negotiations that take place every three years in which "almost all of them are completed successfully."

Several top officials at the TV industry's leading trade associations made their own input.

Colleen Abdoulah, chairwoman of the American Cable Association and CEO of Wow, pointed to what she thinks are flaws of the existing rules regime, including how pay-TV operators are " the media giants" to tie and bundle channels and how big content providers have limited access to online video distribution rights.

"Today, we have smart phones, laptops, tablets, and other smart devices that access rich video content via Internet technologies, yet the law that governs video distribution assumes we still live in a world of one local broadcaster working with one local cable franchise," said Abdoulah.

Gordon H. Smith, president and CEO of the National Association of Broadcasters, gave opposing prepared remarks.

"I often hear references to the 20 year-old carriage law as if that, by itself, justifies change," said Smith. "The simple fact that the nature of the compensation for retransmission consent has changed does not demonstrate a problem. Rather, it shows the means of achieving the fairness that Congress contemplated has evolved along with the market."

Senators also heard testimony from non-industry folk with something to say about the topic.

Mark Cooper, director of research at the Consumer Federation of America, spoke about his conclusions that the retrans rules had "failed miserably."

Bolstering the point of those like Witmer and Abdoulah, Cooper pointed to dramatically rising cable rates. But Cooper also offered knocks against the cable operators by saying that in 1992, Congress didn't go far enough to impose horizontal and vertical limits to help control cable market power and hadn't provided a sufficient check against the power of cable companies to withhold programming access to potential entrants like telephone companies.

"When cable competition policy failed, it opened the door to the dangerous possibility that these problems will persist in the age of digital distribution," said Cooper. "The failure to introduce vigorous and effective competition into local video distribution now threatens the new distribution medium – broadband."

The current rules regime hasn't won any endorsements from University of Colorado communications law professor Preston Padden either, who calls the compulsory licenses and retransmission consent a "Rube Goldberg regulatory structure."

"America's television regulatory policies have come to look like that old closet in your basement that you keep promising yourself that one day you will finally clean out," says Padden.

He is rallying behind a new bill called the Next Generation Television Marketplace Act, sponsored by Republicans which would repeal must-carry and retrans consent rules as well as local broadcast ownership limits. That proposal, though, has already been labeled unacceptable by the NAB.


Twitter: @eriqgardner