Broadcasters hold all the cards

This week, a House committee is taking up possible changes to more than 20-year-old rules that govern “retransmission consent” – the fees paid by cable and satellite providers to local over-the-air television broadcasters to carry their stations.

 

According to the Federal Communications Commission, those fees have skyrocketed, going from $28 million in 2005 to $2.4 billion in 2012.  While it may seem on the surface like a business dispute, consumers are feeling the impact by paying the price in higher rates.  Even worse, many viewers are enduring broadcaster “blackouts,” as local stations pull their programming off of cable and satellite systems as a negotiating tactic to extort higher fees.

 

Broadcaster blackouts are also on the rise – there were 12 blackouts in 2010 but 114 last year – an 850 percent increase.  My community, Toledo, Ohio, is the latest victim.  More than 106,000 cable subscribers have gone without the local NBC station since mid-December.

 

{mosads}I view this issue with a unique perspective.  Our family-owned business, founded by my grandfather in 1900, owns Buckeye CableSystem, the Toledo cable provider that’s been hit with the broadcaster blackout.  Our business also owns a number of television stations in other cities.  I have seen this battle from both sides.  I can accept a system that requires a payment to the television stations because it helps support local broadcasting, but the system today is dysfunctional and is not working for the average viewer at home. 

 

The owners of television stations have been given valuable licenses to use the public airways for free, and that means they have an obligation to serve the public. What needs to change is the current law, which gives the broadcasters all the advantages, ties the hands of the cable and satellite operators and, most importantly, does not serve the public interest.  The Toledo situation is a case in point.

 

During negotiations late last year, Sinclair Broadcast Group, which had just purchased the NBC affiliate, WNWO, demanded that we pay them 9 times more per year than under the previous agreement.  That is outrageous on its face, and even more so when you consider that this station has the lowest viewership among network affiliates in our market, particularly for local news.  Sinclair wanted more than we pay any other station in Toledo.  We tried to negotiate, but to no avail.  On December 15, just twenty days after buying WWNO, Sinclair decided to drag more than 100,000 Toledo viewers into this business dispute, blacking out their station on our system by withdrawing retransmission consent.

 

If this were a free market situation, the local Toledo NBC station would not have been able to use federal regulations to prevent us from offering NBC programming from the neighboring Detroit NBC affiliate.  The two cities are just 60 miles apart and Toledo viewers have traditionally watched the Detroit stations since the dawn of television.  We would have happily negotiated with the Detroit station to continue to carry that NBC programming.  But our hands are tied – the law allows the local station to block us from bringing in an NBC affiliated station from another market.

 

Another option you would think would be open to us would be to give in to Sinclair’s outrageous demands and then allow our customers to decide if they wanted to pay a higher fee to receive that station.  When you go to a supermarket or restaurant, you can purchase or order whatever items you want.  But that’s not the case with local broadcasters and cable.  Believe it or not, the law actually requires that we include all the broadcast stations on our basic tier, even those that demand payment for carriage, and requires our customers to buy that tier before gaining access to any other programming we offer.

 

These are just two of the ways that the current law hamstrings cable operators and hurts consumers.

 

In the case of Sinclair, we continued negotiating through the rest of December and January and were still meeting and exchanging offers in early February, when Sinclair unilaterally ended negotiations, showing their contempt for Congress and the regulations.  Sinclair has refused to bargain with us ever since, even though broadcasters have a legal obligation to bargain in good faith.

 

How is a company serving the public interest, as it is required by law, if it blacks out a station to a large portion of its community and then refuses to bargain in good faith? It’s not, but Sinclair is getting away with this kind of behavior only because the Cable Act of 1992 empowers it and there are no consequences for its abuse of viewers.  The law was passed before the Internet had taken off; before you could watch TV on your computer or smartphone; before TiVo and DVRs, and before video on demand.  The world of technology has changed dramatically and Congress needs to revisit this archaic law and make changes that restore some semblance of a free market to serve the public, not special interests.