Digital Must-Carry Issue Heating Up

Nov 17, 2003  •  Post A Comment

A broadcast industry proposal to change the digital must-carry rule to require cable operators to carry all of the programming streams that broadcasters offer on their new DTV channels appeared to be picking up steam last week.
A final vote at the Federal Communications Commission is expected by year-end.
Under the FCC’s existing regulation, cable operators must carry only the main DTV signal offered by local broadcasters after the transition to DTV technology is complete.
But in a behind-the-scenes campaign, broadcasters have been lobbying the FCC to expand the regulation to force cable operators to carry the multiple programming streams that broadcasters will be able to offer on their DTV channels-or at least all the streams that are offered to the public free over the air.
Broadcasters say the regulatory change is needed to encourage the industry to make the expensive switch to DTV. They also say the expanded carriage obligation would serve the interest of consumers by spurring the introduction of new sources of free TV programming.
Cable operators have been fighting the change because they want to control their channel capacity, determining which programming services are offered to their subscribers.
At least until recently, it appeared that the cable operators would prevail in the battle, because FCC Chairman Michael Powell has made clear his support for their arguments against a multicasting carriage requirement. In addition, Mr. Powell voted to limit the digital carriage obligation to a broadcaster’s main signal when the agency originally adopted the regulation several years ago.
But sources said a majority of Mr. Powell’s colleagues at the agency now are signaling their sympathy to the broadcast industry’s proposal, and the industry lobbying is heating up dramatically as the carriage issue heads for a showdown vote.
“It could hurt the ability of independent programmers to produce the kind of high-quality programming consumers want,” said David Leavy, a senior VP for Discovery Communications.
“Not only is multicasting unfair, it’s unconstitutional,” added Bruce Collins, C-SPAN VP and general counsel.
Said Dennis Wharton, a spokesman for the National Association of Broadcasters, in response, “It would benefit consumers because there would be more competition to cable from free over-the-air channels.”
According to cable industry lobbyists, a multicasting carriage requirement is particularly unfair because it will guarantee cable carriage to a multitude of new broadcast networks for access that cable TV networks have traditionally had to fight or even pay for.
“Comcast firmly believes that the commission does not have the authority to expand broadcasters’ must-carry rights in any respect,” the nation’s largest MSO said in an FCC filing.
Added Brian Dietz, a spokesman for the National Cable & Telecommunications Association, “We believe all programmers, whether cable or broadcast, should compete on the merits of their content, and cable networks should not be hamstrung by an unfair government mandate that would give broadcast networks guaranteed carriage.”
But broadcasters say the main reason that the cable TV industry is upset is that the new broadcast channels will compete with the fare that cable currently offers, some of which is owned by the cable industry.
Offering a concrete taste of what an expanded carriage requirement could mean in the real world, NBC’s owned-and-operated stations recently briefed the FCC on a plan to launch up to three new DTV programming streams with Peacock Network affiliates next year, offering a mixture of high-definition TV, local news, sports and weather programming.
In a filing at the FCC, NBC also said a requirement that cable carry all of a broadcaster’s free DTV programming would benefit consumers by ensuring new alternatives to pay cable and additional advertising availabilities.
“New, over-the-air channels benefit all viewers,” NBC said.
Earlier this month, DIC Entertainment also briefed the FCC on a plan to launch a new 24-hour children’s TV network for broadcasters.
“Must-carry of the entire free portion of the broadcasters’ digital channels is critical to the success of this proposal,” DIC Entertainment said in a filing at the FCC.
In addition, one industry source said the requirement would clear the way for a company like Fox to offer its own 24-hour movie channel using its huge film library to compete with pay-cable networks such as HBO and Showtime.
While the FCC’s Mr. Powell still sides with the cable industry on the issue, a well-placed source said the chairman is unlikely to “fall on his sword” with the sole dissent if all of his agency colleagues favor expanding the carriage obligation.
Mr. Powell told reporters last that there was no clear majority on the issue.
“I think it’s pretty fluid,” he said. “It’ll be pushed out as soon as there is one. But I can’t say that there is one at the moment.”
He also dismissed reports that he had changed his mind and now supports multicast must-carry.
“It certainly would not, as I am standing here, be accurate to say that I’ve changed my mind.”
FCC Commissioner Kevin Martin, a Republican, is said to favor the broadcasters’ argument on the issue, while fellow Republican Kathleen Abernathy also appears to be leaning in the broadcasters’ direction, according to sources. Some sources say the FCC’s two Democrats-Commissioners Michael Copps and Jonathan Adelstein-have also signaled an interest in expanding the carriage obligation, even though they would prefer that the FCC first make clear what sort of new public-interest obligations broadcasters should face with the new channels.
“Before the FCC decides on any new must-carry rules, it must first finish a proceeding on public-interest obligations for digital broadcasting,” said Jeff Chester, executive director of the watchdog Center for Digital Democracy, which has launched a public relations campaign to encourage the FCC to beef up the public interest responsibilities of broadcasters.
Even if the FCC rules in favor of the broadcasters now, the impact of the decision may not be known for years because the change won’t go into effect until the DTV transition is complete.
At least according to some analysts, it’s hard to predict how any programmers will benefit, absent a look at a concrete business plan.
“The impact is going to be negative for all programmers,” said Blair Levin, a telecom analyst for Legg Mason. “If NBC, CBS, ABC and Fox all do it, it undercuts a lot of their own programming.”