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Voice of Experience: Redo Retrans

WASHINGTON — Shenandoah Telecommunications — more commonly known as Shentel, a provider of cable and
phone service primarily to Virginia’s Shenandoah Valley — last week told the Federal Communications Commission
it had negotiated with broadcaster Allbritton Communications in good faith during the companies’ recent
impasse over retransmission consent.

Allbritton had filed an emergency petition to force Shentel to restore its WJLA-TV, the ABC affiliate in Washington,
D.C., which the MSO stopped carrying after the two sides failed to come to retrans terms last month. Shentel
said it was a case of Allbritton overplaying its hand and the cable system having an alternative — Gray Television’s WHSV-TV in
Harrisonburg, Va., a significantly viewed ABC affiliate.

David Ferguson, who recently retired from Shentel after 43 years but stayed on as a consultant to negotiate the latest round of
retrans renewals — including the deal with Allbritton — told Multichannel News Washington bureau chief John Eggerton what he
thinks is wrong with the current state of retransmission consent.

MCN: How long have you been negotiating station
carriage deals for Shentel?

David Ferguson: I have done them since the inception of
retrans in 1992.

MCN: What has been the major
change since then?

DF: In 1992, the majority of the
retrans deals were not retrans,
but must-carry. We started to get
more retrans requests, but we
were always successful in completing
them. But this year, the
requests coming in for compensation
were significantly higher.

MCN: How significantly?

DF: When I say significantly, I mean anywhere from eight
to 10 times the existing rate, sometimes even more.

MCN: But why shouldn’t broadcasters be asking for a lot
more money, given the value of their signal?

DF: I don’t disagree that we should pay for stations based
on the value of that station. The problem I have is the
amount of [the] increase being imposed on our customer
base at one time.

WJLA was aware that we are in very difficult economic
times. Customers are making choices about what services
they can afford to keep and what services they can’t. As
we continue to add additional costs onto these customers
for their cable TV service, we find customers exiting
the service. This isn’t always because they found an alternate
provider, it’s because they can’t afford it.

A legitimate increase, I think, the customers could afford
to pay. But the increases by all the broadcasters were extremely
high. If we were dealing with one broadcaster, that
might be a cost that could be absorbed, but all broadcasters
decided this year that their stations were undervalued and
that it was justifiable to have
these huge increases.

MCN: So what do you do?

DF: We tried to negotiate it
down to a rate that we feel we
could pass on to our customers
and they could afford to pay.
That made negotiations much
more difficult.

As a result, sometimes you
make a decision that, where
you can, you sometimes drop a channel.

MCN: Is there anything inherently
unfair about the way the retrans
system is set up?

DF: I think the FCC should look at
not only retrans, but all programmers.
They need to look at it from
the perspective not necessarily of the
cable operator or programmer, but
from the perspective of the customer.
Are we getting to the point where we
are going to price the customer out of
the ability to have cable service?

MCN: Are you getting to that point?

DF: I think we are there. My position is that customers ought
to have a choice of what programming they should subscribe
to. Programming that has a cost on a per-customer basis
somewhere between $2 and $5, but is programming customers
don’t necessarily want to subscribe to, will eventually
price basic cable out of the reach of the normal customer.

MCN: Are you talking about a la carte?

DF: Yes, I am talking about a customer being able to pick 15
or 20 or 30 channels of his choosing and price it that way.
Today, most programmers don’t give you the option of putting
their programming in a tier for the customer to choose.

For example, if I subscribe to [satellite-TV provider]
DirecTV or Dish [Network], I may have the option to add
the broadcast stations if I choose to, but I don’t have to.
Cable operators don’t have that right.

MCN: Would you have the FCC get rid of must-carry?

DF: I would have the FCC review must-carry.

MCN: What is your solution to escalating retrans costs?

DF: I just know that the way we are operating today, I feel,
is broken and a lot smarter minds than myself need to review
retrans and fi nd out whether is still a benefit to the
end user, by which I mean the customer.

MCN: Is it tougher on smaller operators? [Shentel is a
member of the American Cable Association, a trade group
representing small and midsized independent MSOs.]

DF: Certainly. Smaller operators don’t have the volume of
customers to be in a position to negotiate the best rate.

There was a time when you
could negotiate a most-favorednation
clause in a contract, where
you got the same rate as anyone
else. Today, you have to negotiate
individually. If you are a smaller
cable operator, you normally pay
more than larger ones.

MCN: Do you expect to ultimately
strike a deal with Allbritton?

DF: I think the first step is to resolve
the petition before the FCC. Once that is behind us,
and they have made the ultimate conclusion that I think
they will make, which is that we did negotiate in good
faith, then that can be explored.