Broadband Cable Association of Pennsylvania

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September 17, 2013

Broadcasters are coming under growing pressure as Congress focuses on the law at the heart of disputes like the CBS-Time Warner Cable spat this summer.

The retransmission consent law, a part of the 1992 Cable Act, became the focus of a pair of hearings held last week by key House subcommittees. On both panels, broadcasters found few allies as both Democrats and Republicans questioned the utility of the regime that has become an increasingly important revenue stream for broadcasters.

In the House Energy and Commerce Subcommittee on Communications and Technology - a panel that has historically been sympathetic to the industry - conservative Rep. Steve Scalise (R-La.) and liberal Rep. Anna Eshoo (D-Calif.) found common ground in their efforts to undo portions of the law. Eshoo is circulating draft legislation that would give the Federal Communications Commission more power to mediate retransmission consent disputes, including the authority to prevent blackouts. "Some will say that legislating in this area is akin to picking sides or interferes with a retransmission consent mechanism that is working just fine," she said. "The reality is that the data paints a very different picture." Scalise, a proponent of repealing the retransmission consent law, said he would have taken a different approach than Eshoo's bill, but added, "I do think it was thoughtful and was encouraged by her strong interest in tackling these issues."

Under the 1992 Cable Act, broadcasters can demand that pay-TV operators carry their signal or pay to retransmit it. Broadcasters with small audiences tend to seek carriage while powerful stations with big audiences tend to demand payment - either in cash or the carriage of a nonbroadcast network they also own. After an acrimonious dispute that featured a weeks-long CBS blackout on Time Warner Cable systems in New York, Los Angeles and Dallas, the broadcaster and the cable TV operator came to terms earlier this month. While most observers think CBS came out on top in the negotiations, the end result is that it may have awakened a sleeping giant. Eshoo found the decision by CBS to withhold content from Time Warner Cable's Internet customers particularly galling. She compared retransmission consent to a cancer. "It's metastasizing," she said. "This isn't just one area it's affecting."

Scalise agreed. "This is new ground," he said. "I hope this doesn't become the new normal." Whether or not the legislative effort goes anywhere is still an open question. Lawmakers are likely to tread carefully with reforms that could offend an industry that is key to their tenure. The National Association of Broadcasters, headed by former GOP Sen. Gordon Smith, supports the law and still has allies. "I think we have lots of friends in Congress," said NAB spokesman Dennis Wharton. "There are a lot of people who understand the importance of broadcasting. If members of Congress want to get their political ads on TV they have to come through local broadcasters because we're their conduit between them and their constituents."

Still, opponents of the current retransmission law think they have a window of opportunity as the Satellite Television Extension and Localism Act, known as STELA, expires in 2014. STELA provides statutory licenses that allow satellite-TV companies to retransmit broadcast signals from distant locales to subscribers who can't receive them over the air from their local stations. It's unclear how many people are affected by the act, but by some estimates, 1.5 million people could lose access to CBS, NBC, ABC and Fox if it fails to win renewal. Lawmakers are already talking about reauthorizing STELA, and some see an opportunity to turn it into a vote on changing or repealing the retransmission consent law. "Change is coming," said Brian Frederick, executive director of the American Television Alliance, a group created by the pay-TV industry to fight the retransmission consent law. "It's obvious that some kind of reform is going to happen."

The left-right alliance on reforming the law extends outside Capitol Hill. Liberal-leaning groups like the New American Foundation, Free Press and the National Consumers League joined with the conservative-leaning group Citizens Against Government Waste and free-market academic Adam Thierer in a news conference to condemn the law. "There seems to be a growing interest in addressing the underlying legal framework that has created the current situation," said John Breyault, vice president of public policy for the National Consumers League.

Rep. Greg Walden (R-Ore.), chairman of the Subcommittee on Communications and Technology, said he plans to circulate a STELA discussion draft in the first quarter of next year. The House Energy and Commerce, and Judiciary committees split jurisdiction over STELA. When asked if he thought a stand-alone retransmission bill should go through, House Judiciary Committee Chairman Bob Goodlatte (R-Va.) said, "It's way too early for that decision."Politico

In the two years since the Federal Communications Commission began touting the idea, broadcasters still wonder if they'll lose 20 television channels to help satiate a growing appetite for broadband downloads. "The vast majority of TV stations will intend to stay in the business," said Dennis Wharton, executive vice president for communications at the National Association of Broadcasters. In 2011, the FCC floated the idea of taking back 120 megahertz, eliminating channels 31-51, in order to add to the space available for Internet use. When TV broadcasting went from analog to digital transmission, stations shifted to "actual" channels, while identifying themselves by "virtual" channels viewers knew.

In Pittsburgh that could eliminate WTAE-4, WPXI-11, WINP-16, WPMY-22, WPCB-40 and WPGH-53, which occupy, respectively, actual channels 51, 48, 38, 42, 50 and 43. Under the Spectrum Act of 2012, the FCC established a $1.5 billion fund to "reimburse costs reasonably incurred by broadcasters who are relocated to new channels." That money would be allocated via a "reverse auction," now likely to happen sometime next year, during which stations can turn in their licenses. "We expect that some broadcasters will kick the tires," Wharton said.

Broadcast industry analyst Scott Fybush, writing for current.org, said the 2012 act still mandates removal of 20 channels, but with new technical standards to allow broadcasters unwilling to give up their spectrum to retain substantially all of their coverage. "There is a group that is interested in having it go forward," FCC spokesman Mark Wigfield said. "They are more optimistic that this can be more to their benefit." Wharton calls it a "coalition of the willing" led by former Fox and Disney executive Preston Padden. "He claims he has something like 70 to 100 TV stations that are planning to take part in the auction," Wharton said. "None of them happen to be affiliates of the four major networks."

Wharton said he has not heard of any Pittsburgh broadcasters interested in turning in their licenses, but he also doesn't want to impede the FCC's plans. "We want to make this auction successful," the NAB spokesman said. "We don't want to be fighting this in two years after a failed auction. We want to provide certainty to the broadcast industry and to Wall Street." Spectrum is being found for use by fire, police and other first responders. The FCC last week announced an auction in January in what is called the 1900-megahertz band, well above the TV frequencies. Computer industry observer Shelly Palmer said it could draw interest from holders of adjacent frequencies such as Sprint and Dish Network. Pittsburgh Tribune-Review

House Speaker Sam Smith, R-Jefferson, has set Jan. 28 as the date for a special election to fill the 78th District seat that became vacant with the Sept. 6 death of Rep. Dick Hess. Hess, 74, a Republican, died in Pittsburgh of complications from recent leg surgery. The House district includes all of Bedford and Fulton and part of Huntingdon counties. Candidates for the office will be selected by a process designated by their respective political parties, and the winner of the special elections will take office in the Republican-controlled state House once results are certified. pennlive.com

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