Cable Tiering Protest Aims to Pre-Empt McCain Study

Oct 13, 2003  •  Post A Comment

The latest round of complaints by cable operators about escalating fees for sports programming is being viewed by some as an attempt to take the high ground in advance of a congressional report later this month that is likely to fault multiple system operators for driving up cable rates for consumers.
When cable operators earlier this year balked at ESPN’s proposed 20 percent increase in programming fees, they argued that it was unfair for them to pay so much for a channel that was watched by so few viewers. They also said it was more difficult to pass costs on to subscribers.
Now after more than three months of lying dormant, the issue has surfaced again. Some believe this is an attempt by cable operators to put a public face on their concerns in advance of release of a General Accounting Office report on cable rates scheduled to be released later this month.
The issue first re-emerged nearly two weeks ago when Cox Communications CEO Jim Robbins said during a media industry conference that Cox could not withstand the ESPN’s 20 percent hike or the 35 percent rate increase being sought by Fox Sports, and that he was exploring placing both networks on a tier available to subscribers who want either channel. Fox’s carriage agreement with Cox ends at the end of this year, while ESPN’s expires in March 2004.
Officials at both Fox and ESPN say they oppose their channels being tiered, pointing out that their coverage of sporting events makes them significant audience draws, particularly of the elusive male viewer. Tiering is also viewed as a key issue because they need to be in front of as many viewers as possible to attract advertising.
Industry sources in Washington suggested that Cox might be trying to use the long-awaited GAO study as leverage in its negotiations with the sports programmers-something Cox denies. “This is something that has been very close to [Mr. Robbins’] heart,” the spokeswoman said, adding that the forthcoming GAO study had no bearing on comments by Mr. Robbins.
The GAO report, which is expected to shine an unflattering spotlight on the cable industry, was originally requested by Sen. John McCain, R-Ariz, who has made clear his view that cable operators should tier programming so consumers pay only for what they want.
In testimony before the Senate Commerce Committee last spring, Mr. Robbins blamed rising cable rates on “soaring programming costs.” Since then, other operators have weighed in on the matter, saying as recently as last week at a Standard & Poor’s conference that while operators and programmers remain far apart on the fee issue, there is at least a sense that both sides have softened their stance.
“We are seeing some tempering in [programmers’] demands in the last six to nine months,” said Rocco Commisso, CEO of MediaCom Communications.
Added Michael Willner, CEO of Insight Communications: “You don’t cure a hangnail by amputating the arm,” he said. “The sports problem will be fixed. The rate increases will be more in line with reality.”
Indeed, in addition to fewer threats from the operators’ side, ESPN officials have said they are willing to accept lower rate increases in exchange for longer-term contracts involving more channels. “We prefer negotiating in the boardroom,” said Rosa Gatti, senior VP at ESPN, of the latest brouhaha.
Doug Halonen contributed to this report.