Rep. Rips Retrans 'Racket'

If there was a common theme Wednesday morning at the American Cable Association (ACA) Summit, US Rep. Anna Eshoo summed it up when she called television retransmission-consent deals "frankly a racket."

In a keynote address, Eshoo, a California Democrat, spoke of meeting with one media executive who had just completed talks for a retransmission-consent deal worth up to $800 million. He predicted that number would go above $1 billion in the next round of negotiations.

The consequences of higher retransmission-consent fees include higher consumer costs and more TV blackouts. Eshoo pointed out that the number of TV programming blackouts jumped from 12 in 2011 to 127 in 2013.

Aereo Inc. CEO Chet Kanojia chimed in at today's event held by the American Cable Association (ACA) , which represents independent cable operators, by labeling the amount of money involved in retransmission deals "ludicrous." He said such deals are one reason why his company is trying to change the pay-TV industry.

Traditionally, broadcasters made the bulk of their money from advertising. But that has changed in recent years as the revenue from content licensing has skyrocketed. Rep. Eshoo introduced a bill to spotlight the issue last December with fellow California Democrat Zoe Lofgren called Video CHOICE, or Consumers Have Options in Choosing Entertainment. The bill aims to eliminate broadcast TV blackouts, but it's also written to ensure that consumers can buy pay-TV subscriptions without broadcast content as part of the bundle. The theory is that because viewers can already get broadcast content for free with an antenna, they shouldn't have to pay for it in a premium TV package.

Kanojia also emphasized the issue of antenna TV in discussing Aereo's ongoing battle against broadcasters. With the Aereo case due to be argued at the US Supreme Court later this month, Kanojia made it clear that his company believes the case is not about protecting copyrights, but about protecting existing TV business models.

There is no legal argument over copyright infringement as far as free over-the-air (OTA) TV is concerned. Instead, the high court is faced with the question of whether Aereo is delivering a private performance to each of its subscribers when it transports OTA content in individual streams over the Internet. Kanojia noted that the private performance argument is the same one that lets consumers sing Taylor Swift songs in the shower without paying a licensing fee. If the Aereo argument wins in court, it would mean that the company -- and any others following the same approach -- could legally bypass broadcaster retransmission fee demands. (SeeAereo Injunction Sets Stage for Supremes .)

The retransmission issue is one of the biggest on the ACA agenda, and the group at this year's Summit cheered a win at the Federal Communications Commission (FCC) earlier this week. The FCC officially imposed a ban Monday on joint retransmission negotiations by multiple large TV stations in a single market. (See FCC Tackles Retrans Reforms .)

However, retransmission isn't the only challenge that independent cable operators and their subscribers face. Both Rep. Eshoo and Rep. Peter Welch talked about the fear of a "cable-ization of the Internet." If the cable video business model gets extended to the web, they warned, it could lead to bundled services that would require consumers to buy a basic content tier with every Internet subscription.

Congress and the FCC have much to debate as both pay-TV models and the Internet continue to evolve. Accordingly, there is already a plan in place to revisit the landmark 1996 Telecommunications Act. But that could be very dicey.

"I think that there needs to be obviously a rebalancing of the law," Rep. Eshoo said. But she also cautioned that it took a long time to complete the 1996 bill and it won't be easy to craft a new one.

— Mari Silbey, special to Light Reading

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