Retransmission fees — the fees that over-the-air TV broadcasters charge cable companies to pass along their programming to subscribers — were at the center of the recent standoff between CBS and Time Warner Cable.
National broadcasting companies such as ABC, CBS, NBC and Fox charge cable and satellite companies for the right to retransmit their content to subscribers. Cable companies argue that they should not have to pay much for content that is broadcast over the public airwaves at no charge to those who access it with TV antennae.
The programming landscape has changed dramatically over the past 20 years. After a series of mergers and acquisitions, the “big four” broadcasters — ABC, CBS, NBC and Fox — now control more than 60 percent of cable channels as well. This gives the broadcasters extraordinary leverage in negotiating the terms on which they provide content to cable companies like Time Warner Cable and BendBroadband.
These disputes can be taxing for cable subscribers, who must endure channel blackouts as well as fee increases.
National legislation is needed to shift power back to the viewer. Under the 1992 Cable Act, cable TV companies must obtain broadcasters’ permission to retransmit signals that are available to the public for free. The law does not limit what broadcasters can charge for retransmission.
According to the American Television Alliance, a coalition of industry and public interest groups, retransmission fees have increased from $216 million a year to nearly $2.4 billion in just six years. If the trend continues unabated, fees are projected to more than double by 2018 — topping $6 billion a year.
CBS maintained it only wanted to be paid a fair price for the content it produces, while TWC insisted it was protecting its cable customers from rampant price increases. The dispute boiled down to what constitutes a fair price. Time Warner reportedly said that CBS was seeking to increase its retransmission fees in the disputed markets by as much as 600 percent.
Also at issue are the digital rights to select CBS programs; the broadcaster may deny those rights to Time Warner so it can sell them to some other distributor, such as Netflix.
If nothing is done, the consolidation of television content will bring continued standoffs. Determined to press for an equitable solution, BendBroadband CEO Amy Tykeson has called on Congress to revisit the retransmission consent rules. You can see her testimony here.
Tykeson told Congress that letting broadcasters charge whatever fees they can get away with is a bad deal for consumers.
“The retransmission consent process is harming customers with rapid price hikes and inconvenient station blackouts,” she said. “Consolidation by programming companies prevents cable operators from meeting customer needs with smaller packages or even a la carte offerings. For example, BendBroadband — or any cable or satellite company — cannot offer broadcast stations on an optional basis. In addition, the broadcast companies control many cable channels. We are told how to package those channels, regardless of their cost or popularity.”
What is BendBroadband doing?
BendBroadband has held down retransmission consent fees in three ways. First, we work hard to negotiate with the local stations whose programming we retransmit. Second, we struck long-term deals with the owners of the local CBS and ABC affiliates when they came into the market five or six years ago. Finally, BendBroadband’s sister company, Zolo Media, now owns KBNZ, Central Oregon’s CBS affiliate, and is purchasing KOHD, the local ABC affiliate. These two ownership relationships help us keep a lid on the retransmission fees we need to pass along to our customers.
The tension over retransmission fees hit home in Central Oregon several years ago. When BendBroadband and Fox affiliate KFXO reached an impasse on a new agreement, cable subscribers temporarily lost access to the channel.
“We could not come to terms with KFXO, and they removed the signal from our lineup during the BCS Championships,” Tykeson recalls. “That was an inconvenience for our customers, but at some point cable companies have to stand up against price hikes and unfair terms and conditions that impact our customers long term. The TWC-CBS battle is further evidence that the process needs to be fixed. Congress needs to act to help consumers.”
What can you do? To learn more, check out these websites:
U.S. Rep. Greg Walden, R-Ore., is the chairman of the Energy and Commerce Subcommittee on Communications and Technology, which is considering reauthorizing the Satellite Television Extension and Localism Act (STELA) of 2010. The committee could propose changes to the retransmission consent requirement of the 1992 Cable Television Act. Contact Walden here.