Legislative Update: McSlarrow’s Talking Points for Lobbyists

NCTA president and CEO Kyle McSlarrow has a message for cable executives: Speak with one voice, and legislators will hear you. To help cable lobbyists get in tune with each other, we asked the NCTA chief to outline the most effective arguments for three of the industry’s important legislative battles. Video Franchising The Bells have an effective argument when they say they want to provide competition to cable and the local franchising rules are too cumbersome. Kyle McSlarrow: Our guys are the guys who have lived in a franchising system for decades. It would be astonishing to me that anyone would suggest that this is a system that couldn’t use a little streamlining. Right off the bat, it’s in our interest to make the franchising process as streamlined as possible. There are particular priorities or responsibilities that we view as appropriate for the local communities, but that doesn’t mean that it should be a recipe for delay or inaction. Streamlining is a good thing for us and anybody else. The second thing is that while no one willingly is trying to attract competition, the right policy is competition. Just as telephone companies are going to want to get into video, we’re trying to get into voice. The right policy for all of those things is a deregulated low-barrier-to-entry process that’s fair to all of the providers and treats them equally and doesn’t try to pick winners and losers based on government fiat or on the basis of what technology is deployed. I’m completely comfortable that if we have a true level playing field in any of our products that we will kick butt. I just want to make sure that there’s a level playing field and not have people be cute about it. Multicast Must-Carry Why not carry all of the broadcasters digital services, especially if I would be able to get them over the air? McSlarrow: The Supreme Court upheld the idea that we must carry a primary stream of programming. Whether you agree with it or not, the logic behind that is that if we weren’t compelled to do so, that the very health of the broadcasting industry would be at issue. That can’t be an issue now, because we do carry the primary signal. Now, all that’s going on is in a world where you have many more bandwidth-intensive applications, not least an expanding need to go from one channel to many channels for the use of high-speed Internet access with DOCSIS 3.0, that our efforts to invest and to manage and to try and conserve bandwidth so we can deploy new applications and new services to our consumers would somehow be captured for free by another industry that hasn’t done anything except demand more carriage for more streams. Right now, a must-carry station takes up 6 MHz of spectrum. Their argument is that they aren’t asking for more than 6 MHz, they just want to force us to carry multiple streams within that same 6 MHz. That’s the wrong way to look at it. The right way to look at it is what is necessary to continue the viability of the broadcast industry is not how many MHz they use, it’s whether or not you’re carrying a primary stream. Once we’ve done that, the value to the consumer isn’t dependent on the government mandating carriage. The value to the consumer is what are we using the rest of that capacity for: video on demand, hi-def programming where we want to do it, voluntary multicasting channels that have compelling programming, phone products, high-speed Internet and probably things that we haven’t thought about. The whole point of investing in a network and all the upgrades was not to become more efficient so someone else can come along and steal the spectrum. It was so we can do more for our customers. The compelling message with policy makers is that the right way to think about it is what is right for the consumer. What’s right for the consumer is good news. Yes, we can more efficiently deploy video. That frees up capacity to a lot of other wonderful things. Giving the broadcasters the same old, same old just to chew up bandwidth for no apparent reason does not accomplish that goal. Indecency Cable seems to be on the wrong side of the indecency debate. How can it argue for indecency? McSlarrow: We have to continue to acknowledge that there is clearly some programming that is not appropriate for children. What do you do about it? You have a choice. You either invite the government in to make the decisions for you. Or you can figure out a way to give parents the tools and the control to make the decisions for themselves. It’s fine to admit that there’s indecency on some of the programming. Frankly, it’s not credible to argue otherwise. To some extent, this debate is almost a 1970s debate. The good news here, as in so many other areas of the economy, is that technology allows more consumer control, whether you’re talking about the V-Chip or new program guides or the ratings systems or remote controls and parental controls that are on set-top boxes. The simplicity and ease and effectiveness of the controls for parents is getting better and easier every day. We’re fighting an old fight. The reality is that technology is moving way beyond that. The second aspect is that if you’re a parent and you’re thinking about the media that your children are consuming and are exposed to, a cable operator is willing to provide you with tools, explain them to you, support you and, oh, by the way, to block them if you want them blocked, as we committed to two years ago. As a parent, that is much less of a concern than the fact that there is almost nothing you can do about controlling the kind of content they’re seeing on the Internet. We’re focused on a very small problem that’s actually a controllable problem, when the elephant in the room is that these kids are getting exposed to all kinds of things over which there is no control and no exercise of responsibility. I’m not arguing to do anything on the Internet, but I am making a point that people tend to focus on us because we’re tangible. They know where we live. We have operators that have headquarters. We know how to find somebody that’s in television. That’s easy. The really tough nut is the universe of the Internet where nobody is actually in charge. A la Carte Sen. John McCain (R-AZ) can explain a la carte using the space of a bumper sticker: only pay for the channels you want. Cable’s response isn’t as snappy. McSlarrow: If the bumper sticker says only pay for channels that you watch, then our bumper sticker will say, "In the real world, that’s not how it works." In the real world, the channels that you don’t watch are actually paying for the channels that you do watch. The model that we have right now is a model where the panoply of networks on expanded basic are largely a combination of subscription fees from the operators and advertising. The advertising model works because not only do people receive revenues for advertising based on the actual ratings, but also the potential reach. People scroll up and down. They discover new networks. Network audiences grow, wax and wane. If you sell people individual channels, you are asking them right at the outset to make a choice: Either you’re going to take this network or you’re not. So no one’s who’s a new network has a chance to grow. And the only way the business model works is for you to pay a lot more in direct subscription fees because, by definition, you have a much smaller advertising audience. So you’ve wrecked a business model that actually works pretty well, because a lot of networks you might not watch, but because the advertising revenues are going into the total stream, those other networks you don’t watch are helping keep lower the cost of the networks you do watch. So you cross subsidize across all of them. McCain’s amendment seems OK in that it’s voluntary. McSlarrow: Any time the government basically says: "I’ve got a deal for you—if you don’t do what I’m suggesting you do, I’m going to give your competitor a leg up in the marketplace," or "I’m going to take away one of the rights you have today in a competitive marketplace," that’s not voluntary. Whether or not you call it a mandate, the fact is that it’s still government coercion, so we’re not going to be for it.