The ACA has petitioned the FCC to make it easier for its members to collectively bargain with programmers, which the organization argues will help smaller operators maintain margins, in turn giving them greater latitude to extend and improve broadband services.
The organization cited statistics that overall programming costs have risen at roughly a 10 percent clip every year for nearly a decade, and asked the FCC to give its members and the National Cable Television Cooperative (NCTC) additional negotiating rights. The NCTC negotiates programming rights on behalf of many ACA members.
The FCC is conducting a proceeding on how to evolve Sec. 706 of the Communications Act to remove barriers to infrastructure investment and encourage more expansive and more rapid deployment of networks that can provide advanced telecommunications capability.
The ACA is arguing that one of the biggest barriers for its members is rapidly rising programming costs. As programming costs go up, cable operators feel compelled to sacrifice margin rather than raise its prices on customers. This leaves operators – especially the smaller ones – with fewer financial resources to meet broadband expansion goals.
ACA president and CEO Matthew M. Polka explained in documents filed with the FCC, “It has become evident that the increasing prices video programmers and broadcasters charge multichannel video programming distributors (MVPDs) can act as a drag on broadband deployment. If these prices continue their upward spiral, existing providers of both broadband and MVPD services and new entrants will be deterred from expanding their broadband networks or otherwise undertaking new builds. The FCC can and should address this problem now by modernizing existing MVPD regulations to ensure they work as intended, particularly for providers who are most likely to serve smaller markets and rural areas where new broadband build-out is most crucial.”
The organization cited SNL Kagan, which has calculated that per-subscriber programming costs for MVPDs grew at an annual rate of 9.3 percent between 2006 and 2014, though for smaller providers the growth was much greater. Meanwhile, over the same period, per-subscriber MVPD revenues grew at an annual rate of just 4.9 percent.
MVPD margins will turn negative if this continues, the ACA contends. “If video margins continue to decline, absolute free cash flow declines as well. This will reduce the incentive and ability of providers to undertake broadband builds in new areas, particularly in many of the least-served parts of the country, will be threatened,” Polka said.
The specific rules changes the ACA is asking for include:
- Ensure that an MVPD buying group, like the National Cable Television Cooperative (NCTC), has the right to bring a complaint against a cable-affiliated programmer that imposes discriminatory rates, terms, and conditions.
- Prohibit cable-affiliated programmers from excluding a member of a buying group from participating in a master agreement the buying group has negotiated with a programmer, so long as the member is below a reasonable size threshold and satisfies other reasonable criteria.
- Clarify that cable-affiliated programmers are required to extend the same volume discounts to buying groups as they extend to individual MVPDs; and
- Ease the burden on aggrieved MVPDs and their buying groups to bring complaint cases and standstill requests against cable-affiliated programmers through the use of rebuttable evidentiary presumptions;
And while Congress attached a rider to a recent satellite TV bill that prohibits multiple local stations from colluding in retransmission consent negotiations with MVPDs, most of the ACA’s concerns about retransmission consent went unaddressed.
To that end, the organization renewed its calls on the FCC to:
- Protect consumers and MVPDs from service disruptions under which the parties’ existing retransmission consent agreement would automatically be extended past its expiration date and the broadcaster would continue to receive compensation for retransmission consent per such contract until the matter can be resolved through a dispute resolution mechanism; and
- Rule, after a further notice seeking public comments, that broadcasters’ blocking of online video content amid disputes over linear broadcast station carriage represents a per se violation of the retransmission consent good faith rules.
Filed Under: Industry regulations