Stations, Cable Systems Face Off

Jan 22, 2007  •  Post A Comment

Gloves are off, government bodies are being beseeched and viewers are caught in the crossfire as broadcasters and cable operators square off over how much cable systems should pay to retransmit TV stations’ signals.

In multiple disputes between cable companies and station owners, some of which have lasted more than a month already, tactics are getting tough. Cable companies have begun distributing free rabbit ears equipped with switches, so viewers can toggle between their cable service and over-the-air reception of the disputed local signal. The broadcasters have begun directing vexed viewers to satellite distributors EchoStar and DirecTV.

The fight is playing out across the country:

Mediacom, the seventh-largest U.S. cable operator with nearly 1.5 million subscribers-nearly half of them in Sinclair Broadcast Group markets-is in overtime in its standoff with Sinclair. After Mediacom spurned Sinclair’s gambit for 40 cents per subscriber in the cable operator’s Sinclair markets, the station group pulled the signals of 22 of its stations off Mediacom systems Jan. 6. The signal went dark in cities from Tallahassee, Fla., to Milwaukee.

Belo pulled its analog broadcast signals from Charter systems in five markets at midnight Jan. 4 in a dispute over its demand for compensation for the stations’ high-def signals.

Northwest Broadcasting in mid-December yanked the signal of its Fox-affiliated KAYU-TV in Spokane, Wash., from the Time Warner Cable systems serving the station’s market in Washington, Montana and Utah.

“This is the biggest fight facing broadcasters right now,” Northwest Broadcasting President Brian Brady told TelevisionWeek last week in Las Vegas during the Fox affiliates convention.

It’s pretty big to cable operators, as well. In addition to facing increased competition for subscribers from telecom and satellite distributors-who routinely pay for the right to carry broadcasters’ signals-the operators say they face expenses for continual technological upgrades that makes paying more to stations too burdensome.

The Minnesota Cable Communications Association has urged its state’s congressional delegation to press for binding arbitration to end the Sinclair-Mediacom dispute. Iowa state senators have asked Sinclair to restore its programming to Mediacom in that state until oversight hearings in the state legislature can be held. Mediacom has pressed for the dispute to go to binding arbitration before the Federal Communications Commission’s media bureau.

Last week, the cable operator issued a public challenge for congressman in the 23 states that have Sinclair stations to command Sinclair CEO David Smith to join Mediacom CEO Rocco Commisso at a congressional hearing.

“I think there probably will be hearings,” Dennis Wharton, spokesman for the National Association of Broadcasters, said. “But it’s impossible to predict what Congress will do on any issue.”

Experts say that any outcome on retransmission consent is fraught with unintended consequences, particularly if Congress or the FCC gets involved.

Under the Cable Act of 1992, broadcasters can demand carriage by cable operators. If, however, broadcasters opt for compensation-which could be in the form of cash or carriage of additional channels in the broadcaster’s family-there is no guarantee that the subsequent “in good faith” negotiations will produce either.

Northwest’s Mr. Brady is seeking compensation. He said he rejected Time Warner Cable’s offer to buy time on KAYU because if he is looking for a second stream of revenue, he does not get that by selling Time Warner Cable advertising inventory that could easily be sold to other advertisers.

“It’s just not right. We want cash,” Mr. Brady said.

CBS President and CEO Leslie Moonves has been among the loudest voices demanding cash compensation for retransmission consent, saying such fees could add up to hundreds of millions of dollars.

Sinclair Broadcast has joined Mr. Moonves’ chorus. In addition to its face-off with Mediacom, Sinclair has been negotiating with Time Warner Cable systems serving some 1 million former Adelphia Cable subscribers. A second extension to the Time Warner-Northwest Broadcasting talks was scheduled to run out at midnight Jan. 19. A Time Warner Cable spokesperson said, “We thought these discussions were going well. We’re hopeful we’ll settle.”

$100 Incentive

A call seeking comment from Sinclair for this story was not returned. The station group’s Web site offers to pay viewers $100 toward the cost of signing up for DirecTV. It tells cable subscribers “the Sinclair Stations may be free over-the-air, but Mediacom wants to sell them to you and we think they should have to pay to acquire an asset before they sell it.”

Mediacom declined to comment on industry rumors that Sinclair tripled its asking price to some 40 cents well into the negotiations.

Cable industry consultant Steve Effros believes this is the beginning, not the end, of “a very loud argument” that will produce losers.

“The louder it becomes, the more dangerous it becomes for the broadcasters,” he said. Mr. Effros said that if broadcasters, who do not pay for their use of the airwaves, should get cash compensation that qualifies as a significant revenue stream, they run the chance of provoking members of Congress to rethink the concept of free spectrum.

On the other hand, cable operators who resist paying compensation risk being asked to open up their books to prove that it would make programming costs too onerous.

Mr. Wharton said the NAB can’t urge its members to take any one tack on retransmission but it does believe that they deserve compensation for the broadcasters’ content, which is the most-viewed and thus the most valuable of cable operators’ offerings.

“This is going to be a big issue in the new Congress,” he said.