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Senate to mull retransmission reform

Panel will revisit recent News Corp., Cablevision row

Capitol Hill lawmakers will weigh today whether contentious retransmission consent rules need to be reformed.

But the Senate subcommittee hearing also promises to be a reairing of grievances that led News Corp. to pull its channels from Cablevision’s systems in New York and Philadelphia for nearly two weeks last month, a blackout that left homes without cable access to World Series games.

Thomas Rutledge, chief operating officer of Cablevision, and Chase Carey, COO of News Corp., each will argue that the other has or is attempting to use the power of federal regulators to gain an unfair advantage in the way cable operators negotiate pricing for the right to carry broadcast channels.

Rutledge is expected to call for the FCC or Congress to step in to “restore balance” to retransmission consent guidelines, arguing that the present system is based on an out-of-date “perception of the video marketplace” and gives broadcasters an advantage. Among other things, he plans to underscore that current rules prohibit operators from dropping broadcast channels during sweeps periods but do not prevent stations from pulling their signals before marquee events like the World Series.

“What is clear is that the status quo is hurting consumers and must be changed now,” Rutledge plans to argue in his testimony before the Senate Subcommittee on Communications, Technology and the Internet.

He is calling for existing rules to be modified so that contracts are limited to carriage of a broadcast channel, and not an affiliated network, and that station owners not be allowed to “discriminate” among cable operators. He also will ask that the carriage terms be disclosed in a given market “so that the demands of the parties are fully understood.”

But Carey plans to deliver testimony arguing that the cable operators are intent on politicizing the process “by dragging the government into negotiations that should be settled at the bargaining table, presumably in the hope that they can get our broadcast stations for a lower rate.” In his prepared remarks, he argues that “so-called ‘reforms,’ if adopted, would clearly tip the balance of negotiations toward distributors.” He argues that “99.9% of retransmission consent deals get done without incident,” but those that have not have been the result of a few distributors “unwilling to pay fair cash value for broadcast channels.”

“If broadcasters aren’t able to negotiate on a level playing field for a fair carriage rate then we would be relegated to second-class status, and our future viability would be threatened,” he said.

According to his testimony, he will suggest that one way to protect consumers would be to require that cable operators get a “rebate, credit or decrease in their bill if channels are removed from their lineup.”

Also scheduled to testify at the hearing are Glenn Britt, chairman and CEO of Time Warner Cable; Joe Uva, CEO of Univision Communications; and Charles Segars, CEO of Ovation.

The chairman of the subcommittee, Sen. John Kerry (D-Mass.), has proposed legislation in which television signals could not be pulled until broadcasters and cable operators have gone through a process with the FCC to ensure “good faith” negotiations and that both sides consider arbitration as an option.

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