[opendtv] Re: Commissioner Copps on Internet openness

  • From: "Mark A. Aitken" <maitken@xxxxxxxxxx>
  • To: opendtv@xxxxxxxxxxxxx
  • Date: Mon, 22 Nov 2010 17:36:51 -0500

Thanks Craig.

Round numbers (if I am off base, please stop me!)...some $30B flows in the MVPD arena for cost of programming. Based on whose numbers you believe (NEWS FLASH! Nielsen TV Diary-Only Ratings Lose MRC Accreditation - 154 markets!), some 40-45% of television viewing is local television! Less than 3% of the revenues that flow to programmers comes to Broadcasters! Retrans negotiations are trying to give "balance" to a situation that can be blamed on the governments (FCC) practices of the 80's that allowed cable companies to prosper without any means for local broadcasters to get compensation.



On 11/22/2010 7:37 AM, Craig Birkmaier wrote:
At 5:31 PM -0500 11/21/10, Albert Manfredi wrote:
Seems to me, what you are describing is that the increased cable fees were caused mostly by the need to populate the much greater channel capacity cable system acquired, over the years. So it's not fair to say the cause is retrans consent for the FOTA programming, even though it might be an indirect cause.

Not exactly.

There is certainly a case to be made - and the cable industry does make this case - that the cost per channel delivered to subscribers has remained relatively constant over the years. This was certainly true in the '90s and into the next decade as the number of channels in the expanded basic tier expanded. Now, however, the cost per channel is increasing as the expanded basic tiers are not expanding, but prices continue to grow at rates faster than inflation.

One must look at the combined impact of the options that broadcasters can elect to obtain cable carriage - Must Carry AND Retransmission Consent - which were addressed in the 1992 Cable Television Consumer Protection and Competition Act of 1992.

In two "narrow" decisions in the '90s, the Supreme Court upheld Must Carry, which requires cable systems to reserve up to 30 percent of their capacity for the carriage of local broadcast signals.


If a station does not have content that is perceived to be of significant value by cable subscribers they typically elect Must Carry. In the second Supremem Court decision:

Justice Kennedy's opinion for a divided Court reiterated the constitutionality of the "must-carry" provision. Kennedy noted that the provision had the considerable benefit of preserving free over-the-air broadcasting, promoting the widespread dissemination of information, and promoting fair competition in television programming. Along with four of the other justices, Kennedy also concluded that cable television had come to so dominate the market that without some government support broadcast television might disappear.

The net result has been that anyone who can get a broadcast license is guaranteed carriage on their local cable system, in some cases, even if their signal cannot be received by the cable subscribers in that market. Turner argued that this ties up system capacity that the cable system could use for programming that would otherwise be carried in a market driven system. This year Cablevision asked the Supreme Court to revisit the Turner decisions


If a station does have sufficient market power - i.e. content that cable subscribers desire - they typically elect Retransmission Consent, which allows them to demand compensation for their signals. This alone would not give the comglomerates power over the MVPDs, however, the government has allowed stations (and the congloms behind them) to tie carriage of other channels in order to carry the broadcast channel that is asking for compensation.

This has been used to gain preferred carriage of MANY new NON-BROADCAST networks owned by the conglomerates. It is difficult to demonstrate how this protects over-the-air broadcasting.

Personally I think that the government is simply providing cover for two oligopolies to charge monopoly rents for a service that is in high demand by consumers. If the government were truly interested in protecting consumers they would take legal action to bring to an end the practice of bundling to force consumers to pay for content they do not watch.

And it is worth noting that even with Must Carry and Retransmission Consent, broadcasting is still dying.

This may be the biggest argument to support my contention that Retransmission Consent has been used as a weapon to prop up the fortunes of the conglomerates. After arguing that the government should protect FOTA Broadcasting in the Turner cases, these same conglomerates used this weapon to develop non-broadcast networks, and are now moving their most valuable content from the FOTA services to the non-broadcast networks, while demanding a second revenue stream for ALL of their networks.

Certainly this situation would not exist without government regulation of what SHOULD BE a free and open marketplace.

 And the other way to think of it, if 70 to 80 percent of daytime TV viewing is this "other" programming, meaning what's not on FOTA channels, then one might conclude that the material is actually being watched. So in fact, people are paying more because they are watching more of this non-FOTA material, which is only fair. No matter whether it's the same congloms that create the stuff. (BTW, I don't count airport CNN monitors as fair game.)

The time of day is irrelevant. Non-broadcast channels now draw the largest aggregate audiences in all day parts when we look at networks versus individual programs. I do not take issue with the idea that people should pay for what they watch, although one can make the case that the ads are sufficient payment; that dual revenues streams ONLY EXIST because the government is propping up two colluding oligopolies.

One need only look at Freeview, where these same content oligopolies are PAYING for carriage, rather that demanding compensation.

It make no difference whether the networks I am watching are available FOTA, since I stopped using that service decades ago. The problem is that I am being forced to pay for both broadcast and non-broadcast channels that I do not want. This is not competition, it is using the strong arm of government to collect monopoly rents.

Note that Dan even objects to the notion of paying subscription fees for a network that carries many programs he does not want. He (and I) would prefer to pay only for the programs we watch. The problem is that in the absence of a real market with real competition, the congloms can, and do, demand monopoly prices for content that is already paid for with advertising.

IMHO, there is no "reasonable" rationale for charging $1.29 for a song on iTunes. In a competitive marketplace the cost would be pennies...25 to 50 cents at most. The same is true for TV shows - probably even more true since we typically do not collect TV programs and watch them over and over again. Yet a single episode of a TV show on iTunes costs 99 cents for a 24 hour viewing window.

 retrans consent is now used primarily for the broadcast channels, but
 in many cases the agreement still involve a bundle of channels both
 broadcast and non-broadcast.

True, it seems. Except that as you say, that non-OTA material is being watched, especially during the day. If it were bundled and not being watched, things might be different.

The extended basic tiers are filled with channels that are bundled but not watched by most subscribers. This is true for both broadcast and non-broadcast channels.

It is time for the government to step aside and let the marketplace take over.

 Broadcasters are offering more channels than at any time in their
 history. And still hardly anyone is watching.

I don't trust this FCC to tell us the truth on this subject, Craig. They have an agenda which would not benefit from revealing any increase in FOTA viewership. The other thing is, the facts certainly prove that this OTA "infrastructure" is plenty capable of supporting very decent OTA service, easily the equal or better than anywhere else. So there's no doubt in my mind that broadcasters can make very good use of it, if it suited their purpose.



The purpose is to drive up the value of the spectrum at auction by creating artificial scarcity where none exists. Without must carry and retrans consent broadcasting would already be a historical artifact.

What we will not see is the equivalent of Freeview in this country, as that is what the broadcast spectrum would be used for if the marketplace decided what to do with this spectrum.

On the Internet TV service topic, a CE company that refuses to get in bed with the congloms or with any single specialty browser/search engine has options. My thinking is, you provide a keyboard and mouse for the user to set up the system and to create his bookmarks. Then you provide a smaller and simpler remote control, which could have either up/down and left/right arrows and the <enter> button, or perhaps a joystick and <enter> button, or some such. Something along these lines. So if the user only wants to watch Internet TV, most of the time he'd only need the small remote.

A keyboard and mouse has no place in the family room. And the mouse may be irrelevant in a few years as we move to touch based interfaces, i.e. trackpads and touch screens.

I do agree that you could "program" your TV from a desktop computer or any number of mobile devices.

The real issue here is turning the big screen in the family room into a highly usable display for group activities. I certainly hope there is a vibrant marketplace for products that will compete to be seen on that screen and for the user interfaces that will exist to interact with it.

My bet is that our mobile devices will become that user interface and that we will be able to control what is on the big screen, individually or collectively for group applications. What we do not need is for government or industry imposed standards for the interface to the big screen or the devices that will control it. And we certainly do not need powerful oligopolies determining what is acceptable.


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