Federal lawmakers this week expressed their frustration over rising cable and satellite television prices and numerous programming blackouts that have resulted in many of their constituents losing access to local news, network shows and live sports on pay TV systems several times over the last few years.
Their annoyance was on full display at a three-hour hearing held by the House Energy and Commerce Committee on Wednesday, in which lawmakers asked a panel of four industry experts for their perspective on the current regulatory environment with respect to broadcast station owners and pay television platforms, and whether certain rules that apply to cable and satellite operators also need to be imposed on streaming cable-like services, known as virtual MVPDs, that are growing in popularity.
Industry participants included Fubo TV CEO David Gandler, NAB President and CEO Curtis LeGeyt, Consumer Reports Senior Policy Council and Manger of Special Projects Jonathan Schwantes, and ACA Connects President and CEO Grant Spellmeyer.
All four experts agreed on two points: There are many more options for people to watch live news, sports and entertainment programming than there were a few decades ago, when many of the regulations were put in place. And with all the disruption that technology has brought to the video industry, current regulations that broadcasters and cable providers need to work through as part of their business are outdated and in desperate need of reform.
But that is where the unanimity ended. From there, each witness put forward different ideas on what lawmakers should — or, in some cases, should not — do in order to support a growing and sustainable video marketplace.
The hearing comes at a time when both lawmakers and regulators at the Federal Communications Commission (FCC) are looking at whether regulations that require cable and satellite platforms to negotiate directly with local broadcast station owners should also apply to streaming services.
Currently, streaming services like Fubo, Sling TV and Hulu with Live TV negotiate carriage of local TV stations with the owners of the four main broadcast networks — ABC, CBS, Fox and NBC — a model that is substantially different from cable and satellite.
Curtis LeGeyt, CEO of the National Association of Broadcasters, said having broadcast networks act as a proxy for local stations cuts independent station owners out of crucial retransmission revenue, which broadcasters depend upon to finance their local news operations.
Around 40% of retransmission fees collected from cable and satellite companies go to broadcast station budgets for local news content, LeGeyt said, and while TV stations have increased their output of local news, that investment could be in trouble if broadcasters can't negotiate carriage fees directly with streaming services.
"We need those retransmission consent fees," LeGeyt said during the hearing. "The cost of doing business has gone up for all of us, at the same time that the competition have become more fierce."
That competition includes major tech companies like Google and Facebook, whose search and social media platforms have redirected critical advertising dollars away from broadcast television stations over the last several years.
To that point, LeGeyt argued that current regulations prohibiting local broadcast station owners from owning TV stations that reach more than 39% of the American viewing audience are outdated, because it prevents NAB members from scaling their operations, so they can better compete against what he called "Big Tech."
"All of that means less revenue for local television stations to put into local news, absent some ownership reforms and absent the FCC looking at some of the impact the [streaming services] have had on the marketplace," LeGeyt offered.
LeGeyt stopped short of saying the NAB wanted federal regulators to impose the same cable-like carriage rules on streaming services, saying there was not a consensus among NAB members as to what those regulations would look like.
But some NAB members have affirmed their desire to see those cable-like rules applied to streaming services: Over the summer, they formed the "Coalition for Local News," which is urging the FCC to impose carriage rules on streaming services that force deals to be worked out with station owners instead of the networks.
Fubo says changes could see issues trickle down to streaming services
If broadcasters get their way, it could lead to a scenario where programming blackouts and higher fees that cable and satellite customers have experienced would trickle down to streaming services too, Fubo CEO David Gandler said on Wednesday.
For one, Gandler said Fubo doesn't have enough people on its staff to negotiate complex carriage deals with every broadcast station owner in the country, which means the streaming service might have to prioritize deals only in large television markets.
Gandler also pointed out that Fubo already has deals with the four broadcast networks to provide their live sports and other content to streamers. Negotiating with the affiliate owners would essentially mean having to pay for the same programming twice, which would drive up prices.
"We're already negotiating these expensive rates," Gandler said. "It's very difficult to negotiate with local broadcasters, because they don't own [sports programming] that is owned by [national] broadcasters. And the retransmission fees that are paid, they're quite significant."
Fubo is one of several industry stakeholders that participate in the "Preserve Viewer Choice Coalition," an answer to the Coalition for Local News that is resisting efforts to have cable-like regulations imposed on streaming services. The organization also counts the four broadcast networks as members, pitting the networks against the affiliates that carry their programming.
In a phone interview on Wednesday, Preserve Viewer Choice Coalition spokesperson Bryce Harlow warned that if federal regulators looked at current retransmission regulations while considering similar rules for streaming services like Fubo, "it's pretty clear that you will see increased fees and more disruptions if you were to take that system and put it on streaming."
"You currently have blackouts, disruptions, impasses at a decent rate," Harlow said. "I don't know why you would look at that, and how it doesn't work [for streaming platforms], and the recent history of what has been happening, and supplant it on a system that doesn't have the same origin story [as traditional cable]."
Lawmakers frustrated over TV blackouts
But lawmakers say something needs to be done, because the problem isn't getting better — it's only getting worse. Rep. Doris Matsui of California pointed to reports that showed programming-related blackouts due to carriage disputes had increased over the last several years, with more than 1,000 reported since 2010.
“For anyone who has experienced a television blackout, they’re pretty easy to understand: Consumers pay for something they never get,” Matsui said. “In almost any other industry, charging a consumer for something that’s not delivered would be unthinkable. And, yet, it is an experience that is all too common: You have friends over to watch the big game, or your favorite show, but when you turn on the TV, nothing…these blackouts are unfair, and they have to stop.”
At one point in the hearing, LeGeyt took exception to the repeated use of the word “blackout,” noting that while local television stations might not be available on cable, satellite or streaming services because of a dispute, broadcast channels are still freely available to consumers who use antennas.
“In times of an emergency, when cell networks fail, we are always there providing that service to local communities,” LeGeyt said. “These impasses are last resorts.”
If that comment was meant to win over lawmakers, it didn’t seem to work.
"If there's one thing I would say for sure about this hearing, it is that we have a real problem with blackouts, and it is Congress that needs to cure that," said Rep. Anna Eshoo of California, whose constituents in the San Francisco Bay Area are unable to watch their local Nexstar-owned CW Network station on DirecTV because of a months-long carriage dispute over fees.
"[Blackouts are] a tool of negotiation by people who think of themselves as being innovators and entrepreneurs, 'What an idea, let's just screw the consumer,'" Eshoo continued. "Congress hasn't updated the statutes that govern all of this, they're outdated laws, and they really contribute, I think, to the scourge of blackouts."
If Eshoo sounds frustrated, it is probably because she and another colleague — Rep. Steve Scalise of Louisiana — have twice introduced a bill called the "Modern Television Act" that would repeal provisions of the 1990s-era "Cable Bill" that they believe have caused many of the problems afflicting the video and streaming industry today. Under Eshoo's proposal, the outdated retransmission rules would be replaced with a new set of regulations that would allow cable and satellite companies to continue providing local broadcast stations on their platforms up to 60 days after retransmission deals expire, and encourage cable providers and broadcasters to negotiate new deals through arbitration.
Each time Eshoo and Scalise have introduced the Modern Television Act, it has failed to gain much traction. But Eshoo is hoping things will be different when the bill is reintroduced in the near future, because carriage deals are on the minds of programmers, distributors and consumers alike.
Jonathan Schwantes, a senior policy counsel at Consumer Reports, said his organization supports efforts to push forward with the Modern Television Act, believing it could be one part of the solution to what is an extremely complicated problem.
"It's the definition of insanity: Keep doing the same thing over and over again, and expecting a different result," Schwantes said, adding that the proposal could allow cable, satellite and streaming services to negotiate carriage of local stations separate from cable networks, which could lead to more consumer choice.
It could also lead to more options for traditional cable and satellite distributors, who feel they don't have much negotiating power when it comes to choosing which channels they offer subscribers.
"The little secret that consumers don't understand is that the content providers won't let us, the cable companies, offer smaller packages," said Grant Spellmeyer, the CEO of ACA Connects, which represents small- and medium-sized cable operators. "For my members, without leverage over the content providers, it's take-it-or-leave-it."