By Robert C. Kenny | September 2, 2014
During the past 15 years, pay-TV subscribers have had a front row seat to ever-increasing monthly cable and satellite bills. They have been the victims of erroneous billing charges, excessive equipment rental fees, and year-after-year consumer price hikes more than twice the rate of inflation. A new legislative proposal, dubiously named “Local Choice,” is being pushed by some pay-TV industry advocates. This proposal would impose à la carte requirements on local TV stations – and only local TV stations.
What does this mean in practice? Today, local broadcast stations are included in pay-TV’s basic tier – the cheapest, most affordable package available to consumers. So even if you can only afford just over $20 a month for basic cable, you’re still able to access local news, emergency weather information and sports – like NFL games, college football and NASCAR races, along with other popular entertainment programming on broadcast television. This “Local Choice” proposal would strip most broadcasters out of the cable basic tier and require viewers to “opt in” to purchase their local TV stations – and, no surprise, pay extra for each of the stations they select from an à la carte menu.
Astonishingly, this “choice” would only apply to local TV stations and broadcast networks like ABC, CBS, NBC, FOX and Univision – which host the most-watched and most popular TV shows by far. This proposal unfairly singles out only one kind of programming – local TV stations – for regulatory distribution mandates.
News flash: there will be no real savings for consumers under Local Choice. Viewers will continue to pay for their expensive cable programming bundle, and under this proposal will be forced to pay extra fees to access and manage their local broadcast TV station lineup as part of their pay-TV service.
So, what’s driving this grossly unfair and selective à la carte proposal? Three faulty assumptions: (1) local TV is driving up the cost of consumer cable bills; (2) broadcast TV blackouts are rampant; and (3) programming blackouts must be stopped for the benefit of consumers. Unfortunately, this proposal fixes none of these alleged problems. First, the cause of spiraling pay-TV rate increases has nothing to do with local television stations. In fact, broadcast TV stations are among the most reasonably priced channels in your cable package. Local channels contribute a mere $3 to an average American’s $65 pay-TV bill – a monthly bill that can easily double when pay-TV companies tack on the costs for HD set-top boxes, DVRs and premium cable channels to the customer’s programming package.
Second, the Washington pay-TV lobby is manufacturing a crisis regarding broadcast TV blackouts when, in reality, hundreds of deals are quietly reached each year through free-market retransmission consent negotiations. In addition, in the rare instances in which a broadcast TV blackout occurs, it is typically resolved quickly, with limited disruption to pay-TV subscribers.
Third, this pay-TV scheme will do nothing to stop the blackouts of cable channels. For example, this proposal won’t bring the L.A. Dodgers pay TV sports channel to cable and satellite viewers in California who have been unable to watch their beloved baseball team – a World Series contender – for the entire 2014 season. Nor will this proposal prevent contractual disputes between pay-TV providers and cable networks that have resulted in indefinite, and perhaps permanent, cable channel blackouts.
Let’s be clear, the “Local Choice” legislative scheme gives TV viewers anything but more “choice.” Let’s take a look at the predictable consequences:
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Cable and satellite TV bills will increase. By requiring consumers to pay separately for local TV stations, viewers will be forced to pay more for what they can get now as part of a cable or satellite programming bundle. Today, a local broadcaster hypothetically charges a pay-TV operator 75 cents per subscriber to resell that station as part of a programming bundle. But under an à la carte scheme, that same station will be forced to charge $2 per subscriber (or $3, $5 or $10) to make up for the revenue loss from fewer viewers. Lower viewership means less audience share, and less audience share means lower advertising dollars for local TV stations. Of course, the costs necessary to produce high valued entertainment, sports and local news won’t change. To maintain current programming, those costs will have to be recaptured by charging more for the product. Viewers who “opt in” to keep those local channels will pay dramatically higher rates.
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America’s television viewers will soon have fewer local broadcast TV options. The corresponding reduction in advertising revenues could cripple some local broadcasters, particularly those in smaller markets and Spanish language stations. Local TV stations – which offer lifeline tornado and hurricane coverage that truly saves lives in times of emergency – would see diminishing revenues, and many simply will not survive. This will have a dramatic impact on television viewers, especially those living in small-town, rural America where local TV stations will be hit the hardesteconomically.
And who benefits from a reduction in local TV stations? Clearly it’s the pay-TV companies who want to kill competition from a free and local TV source. That’s why this legislative scheme is being lauded by a pay-TV cabal led by the American Cable Association (ACA) and American Television Alliance (ATVA) members Time Warner Cable, DirecTV and Charter Communications – companies that receive nearly universal scorn for shoddy customer service, price-gouging and rampant greed.
Ironically, these are the very companies who have fought to prevent à la carte regulations from being imposed by the FCC on their pay-TV systems. They all argued vehemently against such regulation, ushering thousands of pages of data-supported arguments into the FCC showing that transitioning to an à la carte model would be cost prohibitive, would result in skyrocketing price hikes and would diminish program diversity.
What this policy flip-flop tells us is that this proposal is all about giving cable and satellite companies an upper hand in the TV marketplace, not about what’s best for consumers. What consumer is saying “I want to pay more to watch the NFL, 60 Minutes, the Olympics and Modern Family”? Everyone knows, cable bills are high enough.
Local Choice is ill-conceived and unwarranted. The proposal was only recently released; there have been no public hearings; no studies to determine the financial and economic impact on consumers; and no consideration of the impact on Latino, African-American and other niche programming viewers.
The sad fact is that Local Choice would devastate the economics of local broadcasting, a free and indispensable service available to all Americans. It will only drive up consumers’ monthly pay-TV bills and force them to pay more for broadcast TV programing, it will drive local TV stations off the air, and it will NOT provide pay-TV subscribers with needed consumer protections to guard against the deceptive billing practices of pay-TV providers.
It’s a bad deal for everyone…except cable and satellite TV providers.
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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.
