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Cable Guys Debate Gov't Role on Broadband

NATIONAL HARBOR, Md. -- American Cable Association Summit -- MSOs want the feds to step in and reform retransmission consent rules, but they want less government involvement on other issues affecting the industry, including network neutrality and a plan to use billions of taxpayer dollars to help spur broadband adoption in communities nationwide.

American Cable Association (ACA) CEO Matt Polka and National Cable & Telecommunications Association (NCTA) president and CEO Kyle McSlarrow say that they don’t have a problem with the government spending broadband stimulus funds on “unserved” communities, but grumbled that those funds shouldn’t be spent in areas that already feature incumbents that offer broadband service. Spending stimulus dollars in those towns “should be off limits,” Polka said on a panel session here Tuesday. (See Policy Watch: Drafting a Broadband Plan , Policy Watch: Stimulating Rural America , and The National Broadband Plan.)

Some small cable operators complained about getting overbuilt by private competitors backed by government funds in their communities.

“We spent several million dollars upgrading and tying fiber to provide advanced services to towns with a few hundreds to a few thousand people,” said Tom Gleason executive vice president of NewWave Communications, which operates small cable systems in Southeast Illinois. “Now the government is going to give somebody else who applied to overbuild us with free government money.”

McSlarrow said regulators aren’t responding to complaints about funds being spent on building broadband networks in communities that are already served by cable companies. “It just keeps happening. To me, I think of all of the issues, this is the No. 1 issue,” he added.

The NCTA chief also warned against government intervention on network neutrality. “We should take the time to be very, very careful before we starting messing with the broadband space.” (See Net Neutrality Ruling: FCC Loses, Comcast Wins and Policy Watch: Will the FCC Declare War? )

Reforming retrans
One of the biggest topics of debate at the ACA Summit this week was retransmission consent, with cable executives and lobbyists calling for government reform of a system that they say favors broadcasters.

Polka pointed to the billions of dollars in quarterly revenue generated by News Corp. (NYSE: NWS) and Walt Disney Co. (NYSE: DIS), the parents of Fox Broadcasting and ABC Television Group, insisting that the media giants are “hell-bent on doing whatever it takes to extract as much cash as possible from your companies." The ACA represents about 900 small and mid-sized independent cable operators.

Bundling advanced services like high-speed data with video has increased the value of an individual subscriber, which has given broadcasters more leverage in negotiations with cable operators, said National Cable Television Cooperative Inc. (NCTC) president Jeff Abbas, pointing to Cablevision Systems Corp. (NYSE: CVC)’s recent skirmish with Scripps Networks. An operator could lose more than just a video subscriber if a customer leaves because a programmer has pulled a network from a system, he contended.

Bigger MSOs that face price increases from programmers can cover some of those costs through selling advanced services -- something smaller cable companies can’t do, Abbas said: “The real problem with the small operators is they don’t have as highly penetrated bundled offerings.”

Association for Maximum Service Television Inc. (MSTV) president David Donovan was the only speaker at the conference to argue that existing retransmission consent rules don’t need to be reformed, noting that programming outages resulting from battles between operators and broadcasters “have been very, very minimal,” and that fees from broadcasters amount to “a small fraction of the overall increase in cable rates.”

“I think the bottom line is the government tends to like marketplace solutions,” Donovan noted.

Executives also debated the impact that new portable media devices like the Apple Inc. (Nasdaq: AAPL) iPad will have on demand for spectrum. Media Access Project CEO Tyrone Brown predicted that regulators will expand the permissible uses for broadcast spectrum, or reallocate spectrum, in order to meet growing demand for bandwidth from consumers. (See FCC Proposes 300MHz More Spectrum by 2015.)

“The pressure is going to be capacity in the spectrum. What we’re going to see happening in the next decade is the demand for spectrum growing at a faster rate than any of us expect right now,” said Brown.

— Steve Donohue, Special to Light Reading Cable

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