By Robert C. Kenny | November 3, 2014
America’s pay-TV lobby, led by the American Cable Association (ACA) and the American Television Alliance (ATVA), continue their non-stop campaign to distort facts and put forward half-truths in an effort to divert public attention away from runaway programming costs for pay-TV subscribers. Using every means at their disposal, they continue pressuring Washington lawmakers for new laws and policies that would separate out local broadcast TV stations from existing cable package offerings and, instead, would require consumers to purchase these popular local TV channels on an ‘a la carte’ basis.
This is one component of a grand strategy to use government intervention to fundamentally alter the nation’s existing video market in order to provide the pay-TV industry with an irreversible competitive advantage over the broadcast television industry for local advertising dollars. Ironically, their proposal is known as ‘Local Choice.’ The irony lies in the fact that their ‘a la carte’ plan– for broadcast channels exclusively– would ultimately increase the cost for pay-TV subscribers to access nation’s most popular local TV programming and news on cable and satellite TV systems, while forcing them to continue paying for cable channels as part of bundled programming packages.
It is hard to see how this plan would benefit consumers. So then why do pay-TV lobbyists continue to push this agenda? Quite simply, it’s all about profit.
As money making machines, America’s cable and satellite TV companies continue to expand profits and reduce service with precision through extraneous fees and charges that consumers now are all too familiar with on their monthly pay-TV bills.
According to a recently released report from the consulting firm EY, cable will lead the entire media and entertainment industry in 2014 despite declines in subscribers with an eye-popping 41 percent profit margin. The Satellite TV industry is right behind with an expected profit margin of 26 percent.
ACA and ATVA continue to expend a great deal of time and effort arguing that the nation’s most-watched and popular broadcast TV programming on pay-TV will increase from $4.9 billion this year to approximately $9.3 billion in 2020, yet purposely remain silent on the unfathomable expected annual cost increases that will be triggered by cable network programming and regional sports networks. By 2020, cable channel programming and regional sports networks are expected to top $50 billion and $10 billion respectively (based on SNL Kagan projections). These cost increases for less popular cable channels will dwarf those for popular broadcast-TV programming.
Blinded by the potential financial windfall they’ll reap as a result of broadcast-TV-only ‘a la carte’ through increased local advertising dollars, the pay-TV cabal is now engaged in a full-throttled effort to hide this truth from their subscribers. Instead, ACA member cable systems and smaller cable systems like MetroCast Communications, which serves parts of southern Maryland, is now sending letters to subscribers to notify them of increases in broadcast TV programming, but not for the hundreds of less popular cable channels they also pay for. In fact, this week, MetroCast sent a letter to its customers stating that in January 2015 the cost for local broadcast TV stations will increase from $1.50 to $5.05 on their nearly $80 monthly pay-TV bill.
Like other cable and satellite TV providers, MetroCast now itemizes charges for broadcast TV programming on subscribers’ monthly bills, but fails to separate out other programming costs for cable channels. The gamesmanship of the pay-TV cabal can’t be trusted.
Monthly programming costs for cable channels, such as TNT and TBS, among hundreds of others, now approaches $40, and that doesn’t include costs for HBO, Showtime and regional sports networks that subscribers may opt to purchase as part of their pay-TV service. But the pay-TV cabal continues to ignore the growing elephant in the room.
Why haven’t ACA member cable systems addressed the excessive and ever-increasing costs subscribers pay annually in equipment rental fees? Pay-TV consumers now pay an estimated $7 billion annually in equipment rental fees for DVRs and set-top boxes. To put these costs in perspective, the monthly rental fee for one DVR ($12), is three to four times the amount it costs to receive the full complement of local broadcast TV programming from ABC, CBS, Fox and NBC through a pay-TV subscription.
Shouldn’t the pay-TV industry offer subscribers a lease-to-purchase option for DVRs and set-top boxes as part of service contract renewals?
Furthermore, why haven’t cable and satellite TV providers taken any proactive measures to overhaul their truth-in-billing practices for the benefit of customers? For an industry apparently concerned with consumer cost-savings, they could start in their own backyard by implementing a series of necessary reforms to help eliminate billing errors that have plagued pay-TV subscribers for years.
Isn’t it time for a national conversation about what’s really driving up consumers’ monthly cable and satellite TV bills instead of focusing on one aspect of the bill: the cost of broadcast TV?
The pay-TV cabal should be concerned about comprehensive reform in the U.S. video marketplace, instead of attempting to skirt the real issues and distorting the truth.
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Robert C Kenny is the Director of Public Affairs for TVfreedom.org, a coalition of local broadcasters, community advocates, network TV affiliate associations, and other independent organizations; he formerly served as Press Secretary at the FCC.
