Gannett Broadcasting Head Wants ‘Reboot’ of How FCC Treats His Industry

TV stations have reason to feel put upon by the FCC, said some analysts who advise investors on the industry, in interviews after Lougee spoke. They cited last week’s 3-2 party-line order cracking down on joint sales agreements among separately owned stations within the same market and joint retransmission consent talks with MVPDs by separately owned top-four stations (CD April 1 p4; p11). A Media Bureau spokeswoman declined to comment for this story.

Broadcasters aren’t necessarily being unfairly targeted by the administration and FCC Chairman Tom Wheeler, despite the industry’s concern, said two longtime communications professors who have worked for FCC Democrats. Some of Lougee’s concerns could have come out of the NAB’s playbook from past decades, said Chris Sterling, emeritus professor of media and public affairs at George Washington University (GWU). Michigan State University telecom studies professor Steve Wildman said it’s early in Wheeler’s tenure and he seems to want to be open with outsiders.

Broadcasters want to face head-on over-the-top (OTT) and Internet Protocol video, be part of the FCC’s broadband planning and serve their audiences by investing in investigative and other news, said Lougee at a Media Institute event Friday. “It would be a mistake for the FCC to view us as yesterday’s news.” Broadcasters “willingly accept those obligations” that come from being more regulated than any other media or telecom sector, he said. “In the modern market, some of those regulations affect our ability to compete,” and that’s a problem. “We are a perfect complement” to technologies like OTT, said Lougee: “There is going to be a whole new generation” of change with cord-cutting, where MVPD subscribers cancel service and sometimes use online services instead.

"It’s a joke” that broadcasters are singled out for rising retrans fees, while those costs to MVPDs and subscribers are far less, and for far more popular programming, than sports content, said Lougee. “There is a vested interest” between cable operators and channels like ESPN, with a “rational” business model that favors the current cable high programming prices, he said. “Let’s not blame broadcasters for rising cable bills.” It’s a “political” and not a “market” issue that MVPDs break out retrans fees for what broadcasters charge but don’t do so for high-priced cable channels carrying programming like sports, he said. Recent interviews with MVPD executives (CD April 1 p6) and statistics from industry researcher SNL Kagan on retrans fees versus cable channel costs reflect Lougee’s comments.

Rising Retrans

"ESPN is hugely popular and delivers the most value of any programming network in America,” responded a spokeswoman for the network. “License fees reflect the tremendous value ESPN provides to our distributors, who consistently rank ESPN as the most compelling and comprehensive driver of their businesses, offering more total value in a multiplatform world than any other cable network.” NCTA declined to comment.

The average retrans fee will rise 29 percent this year to $3.56 per pay-TV subscriber a month, forecast SNL Kagan. It said that monthly fee is about 10 percent of total programming costs on that same basis at Comcast and Time Warner Cable, the top two cable operators that plan to combine in an approximately $45 billion deal. (See separate story below in this issue.) “What’s happening with retrans is the market is finally working” and broadcasters are getting paid more, said Lougee. SNL Kagan forecast retrans fees will rise 19 percent next year to an average of $4.24 a month per subscriber.

If regulation prevents broadcasters from expanding and investing in the business, “there is no pro bono cavalry of Web journalists” coming “to save the day” for news, said Lougee. There has been “a parade of items” from the FCC further burdening broadcasters, he said. “The commission cannot let the pressure and politics of a successful near-term auction do long-term damage” to the industry, he said of the incentive auction. “It’s not good for the country for the FCC to be singularly focused on taking as much broadcast spectrum as possible.” An “integrated” FCC National Broadband Plan taking broadcasters and IP technology into account “is fabulous,” Lougee told us in Q-and-A. “Broadcasters have appropriately been wary” from the start of the plan under-then head of the project Blair Levin, added Lougee: “We were put on the defense, and from a political standpoint,” that wasn’t necessary.

"There is so much I think we can and should do together,” Lougee told us of broadcasters and the commission. “But a lot of actions have spoken louder than words.” Of Justice Department concerns over sharing arrangements between stations, “at the root of that is an incredibly anachronistic view of the market,” he said about what areas broadcasters should be paying attention to, a question asked from the audience by a broadcast executive. That anti-sharing view doesn’t account for cable competition to broadcasters nor the Internet, said Lougee. “And yet the DOJ continues to have a very old filter which it applies."

Reason to Gripe

Wheeler and administration actions have given broadcasters reason to gripe, particularly the March 31 FCC meeting where the retrans and TV station sharing items were adopted, analysts Paul Glenchur of Potomac Research Group and Guggenheim Partners’ Paul Gallant told us separately Friday. “I can see why broadcasters may feel put upon given the actions on sidecars and retrans at the same meeting,” said Gallant. “It’s certainly possible they'd take a more aggressive posture with” the FCC, but they have much “exposure across various FCC issues, so I'm sure they'd be careful about any strategic shifts,” he added.

Broadcasters are rightly worried that the administration and FCC seem to think TV is an inefficient use of spectrum better used by carriers, said Glenchur, who has heard those worries from the industry and investors in those companies. “That seems to be the general policy view of the FCC and the administration generally. And given that, they're swimming upstream.” Investors “have a lot of questions about why” there’s such a clampdown on broadcasters “and why now,” said Glenchur. “It was disruptive to the industry” when “technology, the Internet and other alternatives continue to weaken their traditional business,” he said.

"Never say never,” but Gannett’s current plan isn’t to sell spectrum in the incentive auction, said Lougee in Q-and-A. He wished well those who might want to sell spectrum or channel share, which he said would foreclose future tech opportunities.

"For a matter like incentive auctions, it is unavoidable that there will be contending interests in policy choices to be made,” said Wildman, who in 2013 was chief FCC economist. “As choices are made some participants will at times be disappointed along the way.” Lougee’s speech seems to Sterling like “de ja vu all over again,” said the associate dean at GWU’s Columbian College of Arts and Sciences. “These broadcaster lines are so old they were originally written in quill pen.” Sterling said he couldn’t agree more with those who suggest broadcasters shouldn’t be treated differently than other industries and that Aereo, in “providing online access to broadcast signals should be touted, not throttled.” -- Jonathan Make (jmake@warren-news.com)