Carriage Carnage

[Gregg Lengling]

"KMTV CBS Omaha has withdrawn permission for Cox Cable to carry the station's digital ATSC signal..."

With that declaration opening a three-page memo to Cox HD viewers, KMTV-TV General Manager Jim McKernan detailed his reasons behind a local dispute that's been smoldering for nearly a year.

"The 12-month negotiation which preceded this action was laughable," McKernan continued, "amounting to 'we propose and they dispose.'"

Cox countered with its own message to subscribers expressing disappointment with KMTV for withholding "free broadcast programming, as we have enjoyed providing it at no additional charge to our digital TV customers with HD converter boxes."

But McKernan said "by definition, if a programming service is available on the Cox digital tier, it is not free, because customers are paying a monthly fee for the basic service, the upgraded tiers and the digital services."

In its message, Cox encouraged viewers to contact KMTV (providing a phone number) for any "questions or concerns" about losing the HD channel.

McKernan sees Cox's concern for HD viewers as disingenuous.

"The fact is that the [Cox] system GM would not engage in the process at all. She delegated that to her local public affairs director," McKernan said. "I would think any agreement between us would have been more important. We submitted maybe six proposals over a year, but it was our sense that they were not taking any of them seriously at all... We really validate cable's business platform. We provide extraordinary value not just to their subscribers but to their entire business model."

Mike Kohler, the aforementioned public affairs vice president for Cox in Omaha, expressed some dismay upon hearing McKernan's characterization of the HD standoff.

"I guess we were not aware that Mr. McKernan was that upset. [But] what is he saying? That 'we're upset because of how things have gone in the past.' His opinions are what they are. We have a different view, obviously," Kohler said. "However, we do regret to whatever extent we were responsible for any communications gap that may have existed before."


CASH COMPENSATION

Cox's basic position, said Kohler, is that the cable system "is willing to negotiate in good faith. Where we might be polarized with Emmis is in straight-out cash compensation."

As far as the popularity of HD signals among potential viewers, he said Cox-Omaha "has about 75,000 digital customers and only 2,500 of those customers use HD. It is not cable's fault that the FCC mandated the digital rollout for broadcasters. KMTV wants to be treated like every other cable channel that Cox deals with. But there is one big difference: Every [nonbroadcast] cable channel gives us free advertising time every hour to use as we wish. Broadcasters do not."

Cable carriage of KMTV's analog programming, including CBS primetime, currently the highest rated of any network, is not affected by the dispute. Both KMTV and CBS have made major commitments to DTV in recent years; nearly all of CBS's prime time shows are offered in HD, the most of any broadcast network. Special events from CBS Sports (including the Feb. 1 Super Bowl) are routinely aired in HD.


REGULATIONS LOOM

The Omaha dispute likely will be one among many DTV standoffs and court actions popping up in the months ahead. At its January affiliates meeting, NBC reportedly considered what type of business plan could be mapped out for new digital channels when cable carriage in many markets is an unknown.

Also, three of the FCC's five commissioners recently said they would consider granting broadcasters multicast must-carry, which could complicate existing DTV negotiations in Omaha and elsewhere.

Nat Ostroff, vice president for new technology at Sinclair Broadcasting Group posed the following question: "Why do terrestrial broadcasters allow cable companies to take and use without compensation for a product that costs us millions of dollars to create and deliver?"

One possibility is the status quo.

Barry Faber, Sinclair's general counsel said, "it's hard to change a model. Our view was that we should be paid for our analog channel. The only reason people are acting differently now with digital, I believe, is because it provides a new opportunity."

Ostroff would like to see the NAB negotiate for compensation for broadcasters. He is also aware that broadcasters are enjoined from collective bargaining by antitrust laws.

As a possible solution, Sinclair's Ostroff suggested NAB should consider lobbying Congress to pass a law that would permit the trade association to act as a bargaining agent for local stations, on a market-by-market basis.

"They've [NAB] been passive on this all along and we're dying out here," he said.

Of the 50 or so stations Sinclair owns, apart from their LMAs, all do some digital content, but it was unspecified just how many do HD content, and how much of it. None have digital carriage deals with major MSOs, according to Faber.

Replied NAB spokesman, Dennis Wharton, "if Sinclair were to rejoin NAB, then we would love to entertain possible strategies, but it's hard for NAB to entertain an idea from a group, when that group is not a member."

At the same time, Wharton said, "NAB absolutely supports the notion that TV broadcasters do provide high-value programming for cable operators, and broadcasters ought to receive recognition and/or payment for those programs. Is it that outrageous to suggest that [since] cable is adding customers based on local broadcast HDTV content, that those broadcasters should share in the additional revenue generated? We don't think that's outrageous at all."


ON THE OTHER HAND

Cable's chief competitor, DBS, typically does compensate broadcasters for its digital and analog channels in cash, but broadcaster-satellite disputes also continue to emerge.

In late January, for example, the U.S. District Court in San Francisco extended an earlier temporary restraining order in favor of EchoStar's DISH Network, allowing the DBS provider to continue offering Viacom's CBS and MTV programming in 18 markets until at least early March of this year.

(Both EchoStar and DirecTV currently compensate KMTV in Omaha in separate DBS carriage agreements.)

"Cable says nobody signs up for broadcast channels because they can get it for free over the air," Sinclair's Faber said. "The proof that this is an inaccurate view of the world is the result of local-into-local on satellite. There's a huge growth in satellite subs and a loss of cable and the only thing that has changed is local-into-local."

EchoStar spokesman Steve Caulk does not dispute the popularity of local-into-local for DISH subscribers, but he sees DTV, especially HD, in a different category.

"On one hand, broadcasters say their HD customers are economically important to them, but on the other hand they haven't made the investment to make high-definition TV available to [all of] them," Caulk said. "DISH Network has made the investment and we have the capability to deliver the networks' high-definition programming everywhere across the nation now," unlike terrestrial HD signals, which cover the national map only sporadically.

He said EchoStar has been seeking direction on HD carriage from the FCC for more than two years.