A Simple Fix to a Nagging Problem Expected to Die in the 112th Congress

Retransmission consent (RC) is supposed to lead to orderly agreements between those such as broadcast networks who own distribution rights for video programs and those such as cable networks that want to distribute programs to consumers.  Under current law, local channels can demand that cable operators carry their programming (Must-Carry) or negotiate RC fees with a local distributor to carry that channel.  The Next Generation Television Marketplace Act, introduced in 2011 could fix these problems, but it is doomed for this session.  RC continues causing outages in TV programming (even during the World Series), and dissatisfaction with channel lineups.  Consumers are the victims of this inaction.

 

Innovators that are Internet-based (e.g. Netflix, Hulu) tend to give the consumer better control over program choice and timing (except that rights-owners tend to withhold distribution permission until after the program’s first broadcast time slot).  Many distributors have difficulty reaching agreement with the rights owner on pricing per subscriber and which channels are to be available in the “bundle” covered by the agreement.  Popular channels are routinely bundled with unpopular channels that are included merely to generate advert revenues for the program owner along with high RC fees.  When the negotiating parties dig in their heels, consumers experience the impasse as scheduled programming that is blacked out or a junkyard of feature-length commercials.

 

Marketing innovation is a continual challenge for RC negotiations.  A few innovative distributors (e.g. Ivi and Aereo) think they can skip over negotiating a RC agreement.  Aereo stretches the rabbit ears analogy to new lengths as it tries to avoid RC obligations.  Aereo gives each subscriber one unique antenna to catch over the air broadcast channels and a second antenna to receive programs that the subscriber directed be recorded for later viewing.  This gambit might escape the must carry and RC burdens felt by typical cable and satellite packagers.

 

Ivi seems to have lost its challenge to RC obligations in a recent court decision.  It offered online versions of broadcast channels without an RC agreement while spewing a cynical smokescreen of consumer choice and lower prices.  Netflix complies with RC principles, but the RC fees it pays are adding to its financial difficulties.  Hulu is another consumer option that behaves much like Netflix and targets the same market segment.

 

Recently, Dish Satellite network introduced its Hopper – a DVD-like capability that allows skipping commercials a day after the program’s first broadcast time slot.  Dish’s hopper seems to skirt the RC agreement Dish made to allow broadcasters to earn advert revenues from the programming it gives Dish to distribute, but resolution for that issue might need to wait for the next round of RC negotiations – we can expect fireworks and blackouts.

 

With luck, the Next Generation Television Marketplace Act can be introduced early in the next session of Congress.  It will address some of the dysfunctions of must-carry and retransmission consent.  It should not be difficult and it would benefit the consumer.

 

Alan Daley is a retired businessman living in Florida and following public policy from a consumer’s perspective.

 

 

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