The greed of it all

The pay-TV industry has been pushing for video marketplace changes for the past few years that would provide them with an unfair regulatory advantage over TV broadcasters.  The motive: Pure greed on the part of cable and satellite TV providers. 

Proposed limits on joint negotiations in the marketplace for broadcasters would give the pay-TV industry the upper-hand in the fierce battle for local advertising dollars and retransmission consent negotiations. 

{mosads}But the pay-TV cabal doesn’t want to stop there. Big pay-TV wants to create a broadcast TV only ‘a la carte’ model for customers on cable and satellite TV systems, eliminate the lifeline basic service tier provision on cable TV, and insert the Federal Communications Commission (FCC) in the middle of retransmission consent negotiations to help broker deals when negotiations stall.

Congress and federal policymakers traditionally have opted for new regulations in the private sector to help spur competition, consumer choice and innovation.  The current state of the marketplace turns the pay-TV lobby’s calls for ‘reform’ on its ugly head.  Greedy cable and satellite companies in the U.S. are making money hand over fist, with no economic relief for consumers in sight.  

One only has to look to a new report released this month by the consulting firm EY (formerly Ernst & Young) that was widely reported on in the press showing that cable is projected to lead the media and entertainment industry with a whopping 2014 profit margin of 41 percent, while satellite TV companies will achieve an impressive profit margin of 26 percent.  

These projections signal that there is no dire need for regulatory relief for pay-TV providers at the expense of consumers and broadcasters, especially since there is a considerable difference in the anticipated profit margin for broadcast TV (19 percent). 

Current Congressional efforts to regulate the video marketplace are unfortunately myopically focused on one faulty premise – that TV blackouts have reached epidemic proportions due to retransmission consent disputes between broadcasters and pay-TV providers. 

Today’s marketplace demonstrates just how untrue this fallacy is. Contrary to the pay-TV lobbyist talking points, in the vibrant video marketplace hundreds of retransmission consent deals have been quietly reached this year, without incident, between broadcasters and pay-TV providers. 

For the average American pay-TV consumer, the monthly cost for the full complement of broadcast TV stations is about $3.  That $3 represents the cost to receive the highest-rated, most watched local channels from your cable or satellite operator that typically charges over $100 for their monthly package of programming channels.

This means that Congress—at the behest of the pay TV lobby– has been spending much taxpayer time and effort to address only the $3 portion of your cable and satellite bill and ignoring prime areas of potential consumer abuse by the nation’s pay-TV operators.  Why has Congress largely ignored the $7 billion per year that cable and satellite TV companies require subscribers to pay in equipment rental fees for DVRs and set-top boxes? 

There is one senator that is paying close attention to this problem. Earlier this month Sen. Edward Markey (D-Mass.) introduced an amendment as part of the Senate Commerce Committee’s STAVRA legislation that would implement true reform by requiring the FCC to implement a new standard to preserve competition in the set-top box marketplace and take steps towards curbing the billions of dollars consumers are forced to pay every year in gratuitous set-top box rental fees.  Perhaps this will spur Congress to take action on excessive equipment rental fees that have far outpaced the $3-per-month cost to access local broadcast TV programming.  An average American family with three television sets pays approximately $20 per month in equipment rental fees.

America’s ever-growing dissatisfaction and frustration with the pay-TV industry continues to accelerate under an uncompetitive market structure, enabling an array of well-documented industry-wide practices to ratchet monthly bills upward for America’s cable and satellite TV consumers.  

Today, consumers bear the financial burden of satisfying the pay-TV industry’s unquenched thirst to further expand profit margins. Pervasive market failures have allowed cable and satellite TV providers to arbitrarily raise prices, offer shoddy customer service, and dismiss cases of erroneous billing.

Sen. Claire McCaskill (D-Mo.) continues to seek true reforms that will rein in the abusive business and billing practices of the pay-TV industry. McCaskill has clearly struck a chord with millions of Americans who are fed up with soaring pay-TV rate hikes. 

Congressional hearings on these issues are expected to be led by McCaskill before year’s end which should draw attention to the millions of U.S. consumers sorely in need of economic relief on their ever-escalating monthly pay-TV bills.

Congress can reverse this trend of constant consumer abuse as it embarks on reforming the nation’s video marketplace.  Let’s hope lawmakers see passed pay-TV’s ‘fat-cat’ lobbying tactics and take action to help lower consumers’ monthly cable and satellite TV bills that have risen at twice the rate of inflation for the past two decades.

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.