Customers could be bothered by the true cost of offering cable television channels if federal regulators adopt a new proposal that would require companies to disclose the “all-in” price of service, an industry group said this week.
On Monday, officials with ACA Connects sent a letter to the Federal Communications Commission (FCC) as regulars weigh whether to force cable and satellite companies to advertise the true price of service.
At the moment, cable and satellite companies are allowed to advertise a generic price for service across their most-popular plans, and are only required to note that the plans may include fees for broadcast channels, regional sports fees and equipment in an advertisement’s fine print.
ACA Connects admits that those fees “raise the amount of [a customer’s] bill significantly,” but argued they were necessary to offset higher programming-related costs that are baked into carriage agreements made with the owners of those channels.
ACA Connects counts hundreds of small and rural cable television providers among its members. The group says if those cable providers were required to disclose the true cost of cable programming up front, customers “may be troubled by the high rates they are charged for video service.”
“Consumers are very much concerned by high rates in and of themselves, which are the result of large television broadcasters and regional sports networks…exercising their market power to extract supra-competitive fees for retransmission consent and sports programming,” officials with ACA Connects wrote in their letter, a copy of which was obtained by The Desk late Monday evening.
ACA Connects argued that the fees aren’t necessarily “hidden,” but are rather “line items on subscribers bills” that helps educate them on “why their cable bills keep increasing and who is responsible.”
“By contrast, the [FCC’s] proposed all-in pricing requirement would not advance — and would, in fact — diminish the goal of providing customers with more pricing information,” ACA Connects argues.
It wasn’t entirely clear how ACA Connects reached that conclusion, because the proposal doesn’t prevent a cable or satellite company from breaking out fees on customers bills — they would still be allowed to explain how much customers are paying toward broadcast and regional sports channels, among other programming.
Instead, the proposal would require cable and satellite companies to advertise the true cost that a customer could be expected to pay for service, whereas now those advertised prices are allowed to exclude broadcast and sports-related fees that are usually charged to customers with few ways to escape them.
The Desk reached out to a spokesperson at ACA Connects to ask why the organization feels its member cable TV providers would be unable to continue offering itemized bills with a breakdown of programming fees if the all-in pricing proposal goes through, and this story will be updated when they return a message seeking clarification.
While ACA Connects offers somewhat-questionable reasons for why it opposes the all-in pricing proposal, the organization’s claim that programmers are responsible for higher bills is not without some evidence.
Over the last few years, broadcast and cable channel owners like Fox Corporation, the Walt Disney Company, Nexstar Media Group and Sinclair Broadcast Group have taken opportunities to raise the per-subscriber fee charged to cable and satellite customers in exchange for the rights to carry their programming.
The fees are baked into “carriage agreements” that can dictate a number of other requirements, including a stipulation that cable and satellite providers offer their channels in their lowest-priced package.
Those terms ultimately result in higher bills for cable and satellite customers, with the average customer paying well over $100 just for television service. The price excludes bundled services like broadband Internet and wireless phone, which can drive bills even higher.
On Monday, ACA Connects urged the FCC to “initiate a proceeding to address the real problem: excessive retransmission consent and RSN fees,” joining other companies and organizations in urging federal regulators to examine whether broadcasters and cable programmers are abusing their market position to drive up prices.
Fifteen years ago, cable and satellite companies spent around $200 million toward retransmission consent agreements to offer broadcast and pay TV networks to customers. Two years ago, that figure jumped to $11.7 billion — a 5,000 percent increase — and studies indicate that the price could increase even more within the next few years.
Broadcasters like Nexstar and Sinclair do not dispute asking for more money in exchange for carriage of their channels. Instead, they claim they are only demanding what is “fair,” and accuse cable and satellite companies of holding their viewers “hostage” when they drop channels that they deem are too expensive.
Carriage disputes have become increasingly common over the last few years, with nearly every major cable and satellite operator afflicted by a loss of programming as broadcasters seek higher fees for their channels.
At the moment, Dish Network customers in a number of states are without access to one or more channels licensed to Mission Broadcasting or White Knight Broadcasting due to an ongoing dispute with Nexstar Media Group, which operates the channels on behalf of the two companies. Likewise, DirecTV customers across much of the United States have been without one or more Nexstar-owned channels for more than a month amid a similar dispute. In both cases, programming-related fees are blamed.
Earlier this year, streaming service Fubo was forced to drop dozens of CBS affiliates owned by independent broadcasters like Nexstar, Sinclair, TEGNA and Gray Television after the CBS affiliate board rejected an offer from the network’s owner, Paramount Global, to continue negotiating carriage of their stations. The move was part of a broader strategy intended to “control our own destiny” with respect to streaming carriage, an executive with Nexstar said on a conference call, and the company is currently part of a consortium pushing the FCC to adopt must-carry rules on streaming services similar to those imposed on cable and satellite companies.