August 3, 2008

Surfing for a Better Deal

By John Molseed, Waterloo-Cedar Falls Courier, Iowa

Aug. 3--CEDAR FALLS -- Believe it or not, cable television companies and their customers share common ground.

They both usually end up paying for networks and channels they don't want. Both want to find ways to trim the extra channels to save money.

Betty Zeman, Cedar Falls Utilities spokeswoman, joined representatives from more than 155 cable companies for a three-day conference in Orlando, Fla., for independent cable companies. The American Cable Association and the National Cable Television Cooperative hosted the event.

The companies' goal was to brainstorm ways keep costs down -- for themselves and their customers.

"If we can control our costs, we can control our rates," Zeman said.

The biggest cost to companies, she added, is the cost to carry channels and networks.

Some bigger network owners "bundle" their channels together. That means a cable provider can often buy a group of channels at a lower package price. It also means networks can coerce cable companies to buy channels customers may not want in order to buy a channel customers demand.

For example, she said, a station considered essential, such as ESPN, may be offered at a prohibitively high price by itself, but at a discount if the cable provider also agrees to carry its sister networks ESPN 2, ESPN Classic, ESPN Deportes and ESPN U.

"You cannot be without (ESPN) and remain competitive," Zeman said. "In reality, our ability to pick and choose the cable channels we can carry is more limited than people might think."

Cable customers may watch only a few favorite channels and wonder why they pay full price for dozens they don't watch.

"We can't sell it to customers a la carte, because we can't buy it a la carte," Zeman said.

The cable companies say they hope to address that issue, at some point, with the Federal Communications Commission.

While CFU represents about 13,000 subscribers and other, smaller cable companies represent only a few hundred viewers, the NCTC includes companies that reach 17.5 million viewers and the ACA represents more than 7 million subscribers. The conference allowed the companies to set their priorities, and the companies say they hope to use the weight of those subscribers to guide policy set by the FCC.

If they're successful, it could mean smaller bills for subscribers, industry officials say.

Jake Ward, spokesman for the ACA, said setting standards for bundling is one of many issues the group hopes to address. Ward said smaller providers also pay disproportionately high fees for retransmission.

Broadcast television stations can decide whether they want to be "must carry" status or they can chose to charge cable companies a fee to retransmit their signal.

Most major network broadcasters require a retransmission fee. Ward said smaller stations pay up to 10 times as much as major cable operators.

"The market is broken," he said. "There are significant price discrepancies based on size."

Zeman said many of those retransmission contracts expire at the end of the year. The price of those deals isn't the cable industry's only concern. As some Iowa cable customers learned last year, sometimes coming to an agreement at all can be a huge hurdle.

Sinclair Broadcast Group and Mediacom became deadlocked in a contract battle that led to two Iowa Sinclair stations, KDSM in Des Moines; and KGAN, in Cedar Rapids, being pulled from Mediacom cable lineups Jan. 6- Feb. 2 last year.

Both sides were unable to reach a retransmission agreement, despite directives from the U.S. Senate to the FCC to resolve the situation.

"There really is no mechanism for dispute resolution," Zeman said.

While the priorities set in the Florida conference, which concluded Friday, are clear, the time line for any visible changes isn't as apparent.

"This will likely be a multi-year effort," Zeman said.

In other words, customers looking for a lower bill need to stay tuned.

Contact John Molseed at (319) 291-1418 or [email protected]

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