Cable Executive Proposes Quixotic Price Freezing

by David Goetzl, Jul 20, 2012, 4:57 PM

• Comment
• Recommend (5)
• Tweet
• 

How quixotic is this? A cable executive wants Republicans and Democrats, who can’t agree on whether the grass is green, to take the lead in forging an extraordinary compromise in the TV industry.  

Yes, Mediacom CEO Rocco Commisso is asking Washington for the kind of help it needs itself. So, marvel at his chutzpah.

In the end, his efforts probably won’t result in any industry détente. There is too much money at stake. How often does an established public company take a short-term cut for the potential of a long-term gain? Try spinning that to Wall Street.

But, Commisso – whose cable operator is private -- put forward an intriguing proposal in a letter to the Senate commerce committee Friday, coming before a hearing next week. Expect angry legislators to question why blackouts continue as hugely profitable companies reach standoffs in carriage disputes.

Commisso promised that Mediacom would freeze prices for two years if content providers keep their carriage fees flat over the same period. That would have Mediacom keeping the published rates for packages costing about $27 and $68 a month the same as long as ESPN, Turner and broadcast stations won’t charge it more to offer their programming.

The broader aim is for all cable, satellite and telco TV operators and loads of content providers to voluntarily agree on the same two-year freeze. In his letter, Commisso noted he is not asking Congress or the FCC to take action, beyond lending their support on grounds his proposal would benefit consumers. He says he is confident an endorsement will nudge programmers and distributors to come together.  

Both sides want to avoid any painful legislation. Congress appears increasingly likely to act. Maybe an agreed-upon price freeze could do some good in persuading legislators to hold off.

Commisso’s proposal could eliminate the kinds of standoffs that have legislators apoplectic. Until last night, Viacom networks had been blacked out in DirecTV homes and a bunch of Hearst-owned stations were off in Time Warner Cable homes.

Looking internally, Commisso’s thrust is a two-year moratorium could give the pay-TV industry some time to reflect on potential long-term damage from spiraling content costs. If content providers and distributors need each other, a cycle where Mediacom charges customers more because ESPN is costing it more can trickle down and drive customers away, hurting both entities.

If the economy continues to stumble, some people may just find cable service unaffordable. Others may teach themselves to be satisfied with Netflix and free online streaming.

It is fair to charge that Commisso’s proposal is self-serving. He surely recognizes the pay-TV marketplace now gives the advantage to the content provider. A consumer dealing with a blackout of a favorite channel might drop a Mediacom and switch to DirecTV or Verizon, but there is only one Nickelodeon, Food Network or ABC.

Also, Mediacom, a top-10 cable provider with about 470,000 video customers, saw profits fall 41% in the second quarter. Freezing prices on cable service might hurt a bit, but the company would likely to able to boost profits significantly on its lucrative broadband service. (Commisso has not promised to cap prices there.)

In his letter, he made a not-so-latent appeal to FCC Chairman Julius Genachowski to back the two-year freeze, suggesting it could allow lower-income Americans to use the savings to purchase broadband service. The chairman has lobbied hard to make broadband more widely available.  

If Commisso’s plan has no resonance, what’s next? Likely just more battles and blackouts. As offbeat as the proposal is, it does hit on the sad prospect that the TV industry risks an element of dysfunction politicans have mastered.

• Comment
• Recommend (5)
• Tweet
• 

Be the first to comment on "Cable Executive Proposes Quixotic Price Freezing"

Leave a Comment