WASHINGTON, DC -- NAB President and CEO Gordon Smith testified this afternoon before the Senate Commerce Committee today at a hearing entitled "The Cable Act at 20."
Below is a transcript of his testimony as prepared for delivery.
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Thank you, Chairman Rockefeller, Ranking Member Hutchison and members of the Committee. It was my privilege to have served with you on this prestigious Committee. Remembering that privilege, it is my pleasure now to return representing a great trade association -- the National Association of Broadcasters. Part of what has made my new job at NAB so fulfilling is the focus that Broadcasters have on public service. With a father that worked for Eisenhower and a mother with the last name Udall, public service remains an important value to me.
In large cities and small, in blue states and red, local television stations are an indispensable source for quality entertainment, high-profile sporting events, emergency weather warnings and disaster coverage that can literally make the difference between life and death. We serve tens of millions of Americans every day, are responsible for close to 700,000 U.S. jobs, and are the primary advertising conduit for businesses small and large in communities of all sizes across the country.
Local broadcast television is a wholly unique video service because it is free, it is locally-focused, and it is always on Ė even when pay TV, wireless, and broadband networks may fail.
That is precisely what is at stake today as we review the 1992 Cable Act, which enables a local television model that is the envy of the world. Respectfully, I ask that you focus on the possible devastating impact that proposed changes in the law could have on broadcast localism and on the 56 million Americans that rely on free, local television stations every day.
The 1992 Cable Act ushered in an era of unprecedented choice for viewers of television content and provided local TV stations the opportunity to finally realize the value of our television signals through a free market system called retransmission consent.
Some on this panel will argue that the retransmission consent system is 20 years old and is somehow broken. I would submit that even after two decades, the retransmission consent system is working just as this committee wisely intended.
There are over 5,800 cable companies in the United States. Only three-tenths of one percent of those cable companies have EVER been party to a service disruption. The fact is, over 99% of deals are amicably completed with no disruption to the consumer.If you take a closer look at the disruptions, youíll find three companies Ė Time Warner Cable, DIRECTV and DISH Ė that are principally responsible for the vast majority of disruptions. These three pay-tv companies have been involved in three out of every four disruptions in 2012.
Let me be clear, no one begrudges our pay TV friends the right to make a profit. But when it comes to programming costs, fair is fair. Even after almost 20 years, television broadcasters still do not receive compensation commensurate with their ratings.
This fact is demonstrated in this chart from SNL Kagan. The chart shows the total fees paid to cable companies. The dark blue represents the total retransmission fees to broadcasters, and the light blue are the fees paid to basic cable networks. As you can see, in 2012, cable networks received nearly $29 billion in fees, but broadcasters received just over $2 billion. The wide disparity between fees for cable and broadcast channels does not reflect our value in the marketplace. Broadcasters are not the source of rising cable fees. The costs of cable channels and cableís profit margins are.
Of course, I know each of you are concerned with how contractual impasses between broadcasters and pay TV companies affect your constituents. What you should know is that some proposed changes could actually result in more consumer disruptions. Removing the compulsory copyright license, for instance, would exponentially increase the number of rights holders that need to grant permission before a stationís programming is carried by a cable or satellite company, thereby certainly increasing the likelihood of consumer disruptions.
Instead, we encourage more creative solutions to this issue. First, we urge the FCC to insist that pay TV providers give viewers ample notice of a possible disruption in service.
Second, the FCC should allow customers to easily switch among competing pay TV providers, without incurring financial penalties, and also receive refunds when stations are unavailable.
Third, we could do a better job as broadcasters by educating consumers about the availability of free over-the-air television.
In conclusion, Congress in its wisdom has fostered what is unique across the globe Ė a local broadcasting system that provides local content and community focused programming. Itís how communities share common experiences, itís how you as Senators communicate with your constituents, and itís a lifeline in moments of great peril.
I urge you to carefully consider any changes to this truly remarkable local broadcast system. Thank you for having me here today.
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The National Association of Broadcasters is the premier advocacy association for America's broadcasters. NAB advances radio and television interests in legislative, regulatory and public affairs. Through advocacy, education and innovation, NAB enables broadcasters to best serve their communities, strengthen their businesses and seize new opportunities in the digital age. Learn more at www.nab.org.