News Corp., Fox Continue Battle Over Retransmission Consent In Washington

After a dispute that kept Fox off the air, top News Corp. and Cablevision executives continued to spar before a Senate subcommittee Wednesday. News Corp. COO Chase Carey argued that retrans consent dollars are critical for Fox to offer top-notch programming, while his Cablevision counterpart Tom Rutledge said broadcasters are unduly squeezing the consumer in pursuit of more revenue.

In testimony, Rutledge said that the public spectrum is a "valuable resource for the country, and it's being used in a way that's actually abusing the consumers." By having the opportunity to pull channels off the air while demanding higher fees from cable operators, broadcasters are forcing subscribers to ultimately pay more, he said.

At one point, Carey suggested that consumers have other options in addition to pay TV, including over-the-air service. That would have allowed them to keep watching Fox during the dispute last month, when News Corp. pulled Fox off Cablevision and part of the World Series was off the air.



"Every household in America did have the opportunity, including everyone living in Cablevision (territory) to get the World Series over-the-air for free," Carey told the Senators.

Rutledge retorted: "Which makes the notion of charging for it, ridiculous." A roomful of laughter followed.

Carey wasn't chuckling, and he said News Corp. takes seriously its public obligations. But when Cablevision and other operators are profiting, "we feel we have a right to be fairly compensated" for content that "we pay a lot of money for."

Rutledge and Carey -- and other executives -- testified in a Senate commerce committee hearing on retransmission consent and the public interest, chaired by Sen. John Kerry. Kerry referenced the Cablevision-Fox battle as an example of several disputes where viewers were victims, while being used as a form of leverage as large companies looked for larger revenues.

"Consumers keep getting crunched in the middle ... our constituents should not be the pawns," he said.

Kerry said he favors a process where the FCC could get involved in an oversight role during a retrans standoff to ensure that both sides are negotiating in good faith. Still, that would not take away the rights of each side to cut the cord on channels during an impasse.

Time Warner Cable recently averted a scenario that could have kept ABC off its system. In testimony, CEO Glenn Britt said TWC is not opposed to paying broadcasters retrans dollars, but there must be a system for helping "decide the amount without disrupting the public."

"We're not protesting the idea of paying, we're just saying the mechanism for figuring out the amount is broken," Britt said.

While Britt may favor the FCC playing a role, Univision CEO Joe Uva said he thinks the "government needs to tread very carefully in this area." As a broadcaster with loads of stations, Univision has benefited recently from retrans dollars that have given it a second revenue stream.

One suggestion is establishing a process where the FCC would have more muscle in preventing a broadcaster from pulling a signal during negotiations. But Uva said that might be gravy for operators by removing a "primary" incentive for them to make a deal in a "timely fashion."

On the Fox-Cablevision matter -- where Cablevision wanted binding arbitration to solve the imbroglio -- Rutledge told Senators Fox was seeking an "exploitative" price for carriage of stations in New York and Philadelphia. Rutledge said Fox was seeking an amount more than the combined amount Cablevision has agreed to pay ABC, CBS, NBC and Univision.

News Corp.'s Carey said the amount may have been jarring simply because it was an amount at all -- it was more than the zero it had been getting. "Any increase from zero is going to be significant," he said.

Carey said that even with "American Idol" and "Glee," Fox was seeking an amount far below what much lower-rated cable networks receive. While ESPN may be a special case, Carey said it may receive five or six times more than the Fox rate.

Carey, who wasn't exactly a proponent of high retrans payments in his previous role as DirecTV chief, suggested that broadcasters should have pushed for the dollars years ago. If they were "delinquent" there, the crash in the ad market was a wake-up call. "A single advertising-based business was not going to be viable long term, hence in the last 12 months we've moved to have a dual-revenue business," he said. Sen. Kerry (and Rutledge) advocated some process of transparency in retrans matters, where parties might know how much a Fox is charging versus an NBC.

Carey objected. "I can't think of any real business where you negotiate business in a public forum," he said.

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