Protect TV Viewers and Allow Broadcasters to Continue Negotiating in the Free Market

NAB President and CEO Gordon H. Smith testified before the U.S. Senate Commerce Subcommittee on Communications, Technology and the Internet on May 14, 2013, regarding the the issue of retransmission consent. View the video above.

Issue
Cable and satellite companies negotiate with broadcasters for the right to retransmit their signals in a process known as retransmission consent. Terms can include cash payments, barter and advertising. This compensation is critical to local TV stations’ ability to provide local news, community and emergency information, as well as top-quality entertainment. Recently, certain cable and satellite companies have waged an aggressive lobbying effort urging the government to weigh in on these private, market-based negotiations in an attempt to avoid fairly compensating broadcasters, who produce the highest-rated content on television.

History
Congress recognized that local TV stations should be allowed to negotiate for retransmission consent in the 1992 Cable Act, legislation that intended to curb excessive cable rate increases while promoting competition in the video marketplace. Prior to this law, cable operators used broadcast signals without stations’ consent and resold the signals to subscribers, making millions.

The current free-market process provides incentives for both parties to come to mutually beneficial arrangements, which is why negotiations are completed with no service interruptions or fanfare the great majority of the time. In the handful of instances where agreements are not easily reached, there is a distinctive pattern: 90 percent of the time there is an impasse it involves Time Warner Cable, DirecTV or DISH – the same big companies begging for government intervention.

These big companies are urging policymakers to change the retransmission consent system, simply because they don’t want to fairly compensate broadcasters for their signals. They claim that broadcast retransmission fees (a mere two cents of every dollar of cable profits) are responsible for higher cable bills. The truth is, cable bills have risen faster – sometimes double – than the rate of inflation since 1999, long before broadcasters received cash compensation for their signals. Despite having the highest-rated programming on television, broadcasters have long been the least compensated by cable and satellite companies. One analyst estimated that, if broadcasters received retransmission consent payments at a rate comparable to what is paid to cable networks, broadcasters would receive five times their current compensation.

While complaining about programming costs, cable and satellite companies are pocketing big profits. In 2012, DirecTV had revenues of $29.7 billion, Time Warner Cable had revenues of $21.3 billion and DISH had revenues of $14.2 billion.

Thus far, there has been no substantive government action as numerous policymakers recognize that retransmission consent is a private market-based negotiation that does not require government intervention. In 2011, the Federal Communications Commission (FCC) initiated a rulemaking, requesting comment on retransmission consent issues and laws governing TV carriage. Notably, the FCC concluded that it lacked the authority to impose proposals such as mandatory arbitration and forced carriage. However, it is expected that the FCC may address certain aspects of retransmission consent negotiations in the near future, including seeking further comment regarding network non-duplication and syndicated exclusivity rules.

In 2013, Rep. Steve Scalise (LA-01) re-introduced legislation that would remove fundamental TV carriage laws that are important to local broadcasting, including retransmission consent laws. At the same time, Rep. Anna Eshoo (CA-18) introduced legislation that could undermine negotiations by forcing broadcasters to allow pay-TV operators to carry their signals throughout negotiations, even after contracts have expired. Proponents of these bills are currently working to incorporate provisions upending the retransmission consent process into legislation reauthorizing the Satellite Television Extension and Localism Act (STELA).

NAB Position
Broadcasters strongly oppose government intervention that would upend the retransmission consent system solely for the benefit of the big cable and satellite companies. The retransmission consent negotiation process is fair and market-driven. Eliminating broadcasters’ ability to negotiate for the value of broadcast signals would mean less choice for viewers and fewer resources for stations to dedicate to local news, public affairs programming, coverage of emergency weather events and community activities.

Action Needed
Congress and the FCC should allow broadcasters and cable and satellite operators to continue to conduct private, market-driven negotiations for retransmission consent and avoid tilting the scales in favor of either party. Government intervention would only disrupt a marketplace that has resulted in more programming choices and services for local television viewers.

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