We just published details from a recent American Cable Association filing which asks the FCC to stop Sinclair Broadcasting from “colluding” in the negotiation of retransmission consent with a “sidecar” license holder that’s separate from Sinclair in name. ACA’s fear, of course is that the practice will can drive up prices to MVPD providers. Another example is a 12/2 Mediacom filing questioning the legality of broadcaster shared service agreements.
The NAB has responded with a filing refuting point-by-point some of the “wildly misleading allegations of Mediacom and other pay TV providers who are spending millions in Washington trying to portray themselves as ‘pro-consumer’ – while trying to deny broadcasters a fair price for the most popular programming on television.”
As the NAB filing states: “Cable companies are especially ill-suited to pose as consumer protectors, and their complaints about sharing arrangements among broadcast stations are empty at best, given cable operators’ large, dominant shares in many local markets and their routine participation in joint arrangements, including advertising interconnects.”
See the filing here:
Ms. Marlene H. Dortch
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554
Re: MB Docket No. 10-71
Dear Ms. Dortch:
Cable television interests continue to offer the Commission misleading, inapposite and erroneous arguments related to retransmission consent. The Commission should not be swayed by this misinformation campaign. As the National Association of Broadcasters (“NAB”) has pointed out in previously submitted supplemental comments, the repeated assertions made by cable and multichannel video program distributor (“MVPD”) interests are not only unsupported by the record, but directly contradicted by facts before the Commission.
Rather than grapple with the facts presented by NAB, cable interests have distorted NAB’s arguments and largely reiterated discredited claims and calls for government intervention into the retransmission consent market, even where the Commission has no authority to act. Most recently, Mediacom, under the guise of concern for consumers, made conclusory claims attacking broadcasters, with no supporting data or citations.
Cable companies are especially ill-suited to pose as consumer protectors, and their complaints about sharing arrangements among broadcast stations are empty at best, given cable operators’ large, dominant shares in many local markets and their routine participation in joint arrangements, including advertising interconnects. While NAB will not respond to every one of the repetitive and unmeritorious claims made in these various cable industry submissions, below we address themes common to several cable filings.
I. The FCC Has Properly Recognized that It Lacks Authority to Adopt the Biased Rules that Cable Wants
ACA and TWC continue to urge the Commission to enact rules that the FCC has said on more than one occasion it lacks the statutory authority to adopt – namely, mandating that a broadcaster’s signal be carried on an MVPD after a retransmission consent agreement expires and while the terms of a new agreement are being negotiated.4 Even beyond the clear lack of statutory authority, ACA’s and TWC’s proposals are bad public policy. If an MVPD could continue carrying a local station’s signal under the terms of an expired retransmission consent agreement, that MVPD would have no incentive whatsoever to negotiate in good faith for a new agreement. This proposal is simply another attempt by cable interests to use the FCC to tilt the retransmission consent marketplace in their favor.
Calls for mandatory arbitration or adjudication of retransmission disputes are similarly flawed. Nearly three years of repetition do not provide the Commission with the authority to impose “mandatory biding dispute resolution procedures” that it explicitly said it lacked when initiating this proceeding in early 2011.
II. Despite Cable Arguments, Evidence that Joint Negotiation of Retransmission Agreements Actually Harms Consumers is Lacking
Cable interests repeatedly claim that stations participating in shared services and similar agreements that permit them to negotiate together for retransmission consent obtain higher prices from MVPDs than those stations would if they negotiated separately. NAB has not only pointed out the paucity of evidence showing that the rates obtained by stations negotiating together are higher, but also that cable’s economic expert admitted that his theory “does not prove that we would necessarily expect to find such a result.” We also have submitted an economic analysis, which found that “neither economic theory nor the available evidence provide a persuasive basis for concluding that joint negotiation of retransmission consent by stations in the same market has a positive effect on retransmission consent compensation.”
Rather than trying to fill this crucial gap in its evidentiary case, the cable industry has instead “doubled down” on its existing arguments. ACA continues to argue that stations negotiating jointly obtain higher retransmission fees, again relying on its economist’s theoretical construct and ignoring his concession noted above that the theory may not prove anything. ACA concedes that it has, at best, limited data concerning retransmission rates, but claims that “all of the available evidence suggests” that joint negotiations result in higher fees. NAB pointed out, however, that the ACA “evidence” commingled must carry and retransmission consent stations, making it impossible to determine whether the stations negotiating jointly were paid any more than another station negotiating for itself alone. ACA simply ignores this fatal defect in favor of reiterating its baseless conclusion. Repetition, however, does not establish the truth of cable’s claim that joint negotiation forces MVPDs to “pay a premium,” and the Commission can only act on the basis of facts established in the record.
It is readily apparent that the cable complaints about joint arrangements amount to no more than a desire to increase their own market power by “dividing and conquering” local television stations. This objective is shown quite clearly by Mediacom’s most recent retransmission consent missive to the Commission, which vociferously objects to any kind of broadcaster joint arrangements, including common ownership, and even complains about “acquisitions that do not create new duopolies.” The private desire of cable operators to have the upper hand in negotiations, however, is not synonymous with the public interest. The absence of evidence that stations participating in shared services and similar agreements in fact are paid more because of undue market power resulting from those agreements remains a key failing in the cable arguments.
Finally, NAB notes that cable’s arguments suffer from another key failing. Even assuming, as cable repetitively claims, that joint negotiation of retransmission consent leads to both higher retransmission fees paid to broadcasters and higher rates for cable customers, there is still no basis for concluding that prohibiting the joint negotiation of retransmission consent would result in lower prices for consumers. After all, if a cable operator’s costs were to decline for any reason, there is no requirement that this savings be passed on to consumers in whole or in part. A cable operator could instead retain any savings to increase its profit margins.
Indeed, as NAB has previously explained, cable’s long record of increasing subscriber fees well beyond the rate of inflation pre-dates by many years the emergence of cash compensation for operators’ retransmission of broadcast signals. The repeated protestations by cable operators that they want the Commission to intervene in the retransmission consent marketplace to protect consumers – rather than their own pocketbooks – thus ring hollow.
III. The Commission Cannot Ignore Cable Market Power
NAB has shown that cable operators and other MVPDs have market power that dwarfs the competitive position of most local broadcasters. Notably, shared services and similar agreements among broadcasters most often occur in small and medium television markets, where the stations’ lack of market power compared to large cable operators and MVPDs is most acute. In a number of markets in which ACA again asserts that two separately owned broadcasters jointly negotiate retransmission consent, a single cable operator enjoys a dominant position, controlling as much as two-thirds of the households served by MVPDs of all types.
Not only has the share of the total MVPD market controlled by the ten largest MVPDs dramatically increased in the past decade, NAB demonstrated that local clustering has increased cable market power in many local markets. Even separately owned cable systems, moreover, typically reach agreements to sell advertising across all of their systems in a television market. And, unlike broadcasters, there are no FCC rules limiting the size or ownership of cable systems and other MVPDs locally, regionally or nationally. This high degree of concentration of ownership and control in the cable industry makes cable claims to be “victims” of joint negotiations among far smaller television stations, at best, incredible.
Alternatively, TWC argues that cable operators do “not possess market power,” citing the concurring opinion of Judge Kavanaugh in Comcast Cable Communications, LLC v. FCC. But what Judge Kavanaugh concluded is that no single cable operator possesses national market power. Even he agreed that, “[i]n some local geographic markets around the country, a video programming distributor may have market power.” And NAB’s arguments in this proceeding have focused primarily on the market power that cable and other MVPDs have in the local markets for retransmission consent. It is particularly ludicrous for TWC to assert it lacks market power, given it has a 66 percent or greater share of the entire MVPD market in eight Designated Market Areas (“DMAs”) and a 50 percent or greater share in 27 DMAs – as well as a whopping 90.9 percent of the video market in one DMA (Honolulu). Numerous press accounts moreover indicate that concentration in the cable industry will only keep growing28 and that the combination of existing large cable operators will further increase their market power, including regionally and locally.
The Second Circuit Court of Appeals recently confirmed the continuing economic power of cable operators. In Time Warner Cable Inc. v. FCC, the Court rejected arguments that cable operators do not possess market power. The Court found “cable operators continue to hold more than 55% of the national MVPD market and to enjoy still higher shares in a number of local MVPD markets.” The Court went on to point out “substantial record evidence” that “cable operators maintain significant shares in various local markets and that vertical integration remains pervasive in the video programming industry.” The Second Circuit simply could not “overlook record evidence that cable operators maintain a more than 60% market share in certain MVPD markets . . . and that the video programming industry has a long history of economic dysfunction.”
Cable claims that the Commission should ignore the growing consolidation of the MVPD industry, and instead conclude that agreements among some small and medium market television stations give those stations undue economic power, are clearly nonsense. The fact that cable operators such as Mediacom are now reduced to arguing in a retransmission consent proceeding that “broadcast consolidation” causes a range of implausible harms ranging from “enhanced station market power over advertisers and syndicators” to “potential risk to the success of the spectrum auction” only shows their desperation and their cynicism.
* * * *
NAB filed its supplemental comments and this submission to address widespread and persistent efforts by the cable industry to misinform the Commission and the public about retransmission consent. The Commission should decline to consider changing its retransmission consent rules in the biased ways that would favor the increasingly concentrated cable industry.
Jane E. Mago
Executive Vice President and General Counsel
Legal and Regulatory Affairs
cc: Chairman Wheeler