Notice to Pay-TV Subscribers of Carriage Disputes a Hot-Button Issue
Whether pay-TV providers ought to tell subscribers before carriage contracts expire is a hot-button issue, judging from responses to our question at a panel discussion Tuesday about retransmission consent. Broadcast representatives continued to support the idea, which has been floated in FCC filings (CD June 7 p5), and cable executives oppose it. A supporter of notice to subscribers is the New America Foundation, one of the public-interest groups that has joined 14 cable, satellite and telco-TV petitioners in seeking commission intervention in carriage disputes between TV stations and multichannel video programming distributors (MVPDs). At several points during the Broadband Breakfast Club discussion, speakers interrupted each other and the moderator.
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Pay-TV customer notice “would be an important part of any part of reforming the retrans framework,” said Vice President Michael Calabrese of the foundation. “There should be some substantial notice to the MVPD customer that they could be losing a certain signal, so they have time to shop around for an alternative. I agree that in reality there are very high switching costs, but at a minimum consumers should have 60 days” notice. Switching providers is “really tough now that we've lashed television” to broadband as a bundle, raising costs to change, he continued. Early termination fees like those charged by Time Warner Cable and Verizon mean subscribers have to cut providers “a quite hefty check” to switch during their contract terms, said lawyer John Hane of Pillsbury Winthrop, who has TV-station clients.
Lead petitioner Time Warner Cable supports giving customers information, said Vice President Fernando Laguarda. He said video subscribers have a choice of providers, whereas the “customers of broadcasters don’t have a choice.” They often can receive only one affiliate of a network. Laguarda said he worries about unnecessary customer losses and confusion if subscribers get a heads up about expiring retransmission-consent agreements. “Notice of disruption, just like actual disruption, is a consumer harm and causes anxiety and disruption,” he said. “I'm taking it as a good-faith request to provide customers with notice about the potential for disruption, but you see it happening already as a bargaining tactic” by broadcasters, Laguarda said. “It may lead some consumers to switch to their second- or third-best alternative or fourth-best MVPD when they didn’t otherwise have to."
Consumers should have the opportunity to change MVPDs to one that has a deal with a station, said lawyer Antoinette Bush of Skadden Arps, representing the Big Four networks at the FCC on the retransmission consent petition. Thirty days’ notice before a deal expires would help, she said. “They're not required to give notice that the programming is available to other sources,” Bush continued. “The key word here is the threatened loss of the signal, because there are actually very few instances of loss of a signal.” Contracts expire at different times for MVPDs, she said. “They're staggered, they're different and consumers should have the opportunity to switch."
FCC rules now require cable operators to tell customers 30 days before changing channel lineups, said American Cable Association President Matt Polka. Broadcasters often run screen crawls and provide other information to viewers when carriage impasses loom, he said. Such issues are “a perfect reason why the commission needs to put out” a rulemaking on retransmission consent, Polka said: “I find it perplexing why the broadcasters would oppose that.” Cable operators want to “have your cake and eat it, too,” by requesting findings of effective video competition from the commission while saying the market for broadcast programming doesn’t work, Cook said. The FCC approved such orders for 200 communities Friday, she noted (CD June 7 p11). Polka responded that “there may be effective competition in the market, but there is not effective competition for retransmission consent.”
Hane had harsh words for cable operators’ program choices. He posited a choice between “free TV with crap on it” and “decent programming” that needs normalized returns from retransmission fees for broadcasters -- or “you've got to break up the MVPD business.” Nobody in that industry “has the guts to differentiate their business” by not carrying similar lineups of national networks, Hane said. That makes for a “totally undifferentiated” product, he said. Laguarda responded that cable providers differentiate themselves with local programming, such as Time Warner Cable’s full-time news channels.
The executive of an independent cable network in front of 42 million pay-TV subscribers said he’s stuck between “very big media companies” on both the MVPD and broadcaster side. Higher retransmission consent fees leave MVPDs with less money to pay for the likes of the Ovation network, said the official, Executive Vice President Chad Gutstein said. “Those of us with the least amount of leverage in this game are going to be the ones that are most impacted,” he said. “I'm not saying we've not been able to grow,” because the channel began with 5 million subscribers, “I'm saying that growth has been impacted by what’s happening in retransmission consent.”