Cable operators are claiming that forcing them to carry all of the digital TV streams a broadcaster can program could cost the industry in excess of $100 billion, according to a new study.
WASHINGTON, D.C. (The Hollywood Reporter) -- Cable operators are claiming that forcing them to carry all of the digital TV streams a broadcaster can program could cost the industry in excess of $100 billion, according to a new study.
In a report by the research firm Kane Reece for the National Cable & Telecommunications Assn. released Sept. 7, it was estimated that the so-called "multicast, must-carry" requirement could cost the industry as little as $4.2 billion or as much as $115.6 billion in revenue that cable operators would lose if they are forced to carry the half-dozen programming streams digital TV allows broadcasters to air.
NCTA president Kyle McSlarrow said the costs would come from bandwidth lost to air broadcasters' multicast signals. Digital TV gives broadcasters the ability to air one high-definition broadcast or a half-dozen standard-definition digital programming streams at once.
McSlarrow said the study gives lawmakers a range of possible costs to contemplate as they make their decisions on a new digital TV law.
"It has given us a range," he said. "None of which is small potatoes."
The fight over the "multicast, must-carry" provision is intensifying as the key congressional committees that oversee the TV industry must come up with nearly $15 billion in new money or cuts in government programs as a way to ease the national deficit.
Congressional budget rules require the House Energy and Commerce Committee and the Senate Commerce Committee to approve legislation under the budget reconciliation process by Sept. 16. That date is likely to slip as congressional attention is diverted to disaster relief and the confirmation of two Supreme Court justices.
Once those committees are done with it, then the budget committees in both houses must approve an omnibus budget bill. Any differences between the two omnibus bills must then be worked out in a House-Senate conference committee.
Lawmakers on the committees are expected to approve legislation that will set a drop-dead date for the switch to digital TV. Once broadcasters switch off their analog signals, the government plans to auction those frequencies to the highest bidder. The proceeds for the auction are expected to generate much of the $15 billion the committees need. House Commerce Committee chairman Rep. Joe Barton, R-Texas, already has introduced legislation with a hard date of 2009. Senate Commerce Committee chairman Sen. Ted Stevens, R-Alaska, is expected to introduce his version soon.
Currently, broadcasters are required to stop analog transmissions at the end of 2006, or when 85% of the American TV-viewing audience receives a digital signal, whichever comes later. The 85% number has long been considered an unreachable goal. The National Assn. of Broadcasters contends that there are 73 million television sets in use that rely on free, over-the-air broadcasting as their only source for TV reception. A recent study by the GAO found that 20.5 million TV households rely exclusively on over-the-air TV reception.
The cable industry claims that a multicast, must-carry requirement is unconstitutional on First and Fifth Amendment grounds. Although broadcasters are now able to force cable operators to carry their programs, cable operators contend that forcing them to carry more than one programming stream violates the 1992 Cable Act and the Supreme Court opinion upholding the law.
McSlarrow also argues that it would fail constitutional muster because it would be an illegal "taking" of private property that would expose the federal treasury to a potential claim under the Tucker Act for the lost revenue.
"There is no reason to reward broadcasters with multicast, must-carry rights simply for returning spectrum that they were never meant to keep any longer than necessary to facilitate the digital transition," McSlarrow wrote in a letter to lawmakers that accompanies the study. "And there is no reason to do so when such a taking of property could expose taxpayers to enormous claims against the Treasury."
While broadcasters would have to turn off their analog signal on the "hard date," McSlarrow said they would still have to send both an analog and a digital signal down their conduits because so many cable subscribers have analog set-top boxes.
Broadcasters contend that they need a multicast, must-carry requirement to remain a viable business. They argue that the cable industry is fighting the requirement because they fear the competition broadcaster-produced programming would give cable programming.
"Only in the Orwellian world of giant cable cartels does more competition equate with higher cost to consumers," NAB spokesman Dennis Wharton said. "We're optimistic that Congress will reject the call of the cable monopolist and embrace more choice for local television viewers."