That wasn’t the precise topic of the Senate Commerce Committee hearing today. (It had the boring title: “The Cable Act at 20.”) But the question — as well as ones about whether the federal government over-regulates media — bubbled underneath the discussion of problems including higher-than-inflation annual pay TV price hikes, and contract disputes that sometimes result in blackouts of consumers’ favorite channels. Committee Chairman Jay Rockefeller (D-W Va.) says that there’s too little competition in a system where pay TV customers “are still forced to pick larger and larger packages of channels no matter how few they watch.” His view resonated with Colleen Abdoulah, a witness who chairs the American Cable Association which primarily represents small and mid-sized cable operators. She says that broadcasters make “crazy payments for sports (rights) because they can be forced onto consumers…This abuse of power should be outlawed.” Mark Cooper of the Consumers Federation of America also called for changes that would enable pay TV customers to just buy the channels they want. “The only way to break the market power (of major networks and programmers) is to ensure consumers have choices.”
The discussion kept returning to retransmission consent agreements and disputes, one of the lasting legacies of the ’92 Act. Time Warner Cable’s Melinda Witner told lawmakers that it’s time to change some of the rules. They’ve resulted in “significant and ongoing consumer harm,” she says. In the first half of 2012 there’ve been 69 blackouts, +39% over all of last year, and “we can expect blackouts to increase in the future.” Broadcasters not only demand that distributors pay for programming that’s delivered over the air for free, she says, they insist that cable and satellite distributors carry channels that they don’t want. That results in “bloated packages and higher costs to consumers.” Since the major networks are must-have services, it’s “the opposite of a free market.”
But broadcasters countered that the current system is working. “Bad weather is a far greater source of consumer disruption” than retransmission consent disputes, CBS’ Martin Franks said. National Association of Broadcasters chief Gordon Smith noted that 75% of the blackouts this year involved just three companies: Time Warner Cable, Dish Network, and DirecTV. He’s not opposed to changes, though. He wants pay TV companies to notify subscribers well in advance when a potential disruption is coming, make it easier to switch services, and he wants them to provide refunds to customers for the days when they go without channels for which they’ve paid. Franks noted that changes in the law could create problems for CBS, which spends $5.5B a year for programming. “We need to be able to plan. And we know how this system works….I guess we prefer the devil we know.”
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