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Broadcast stations, cable battling over fees
[February 18, 2007]

Broadcast stations, cable battling over fees

(Paducah Sun, The (KY) (KRT) Via Thomson Dialog NewsEdge) Feb. 18-- -- The gauntlet is down in the high-stakes battle for television watchers.

Come March 2, Comcast Cable customers in the Paducah area could be without sister stations KBSI and WDKA because operator Sinclair Broadcast Group wants to charge a fee. Comcast counters that cable companies traditionally haven't had to pay for signals that can be received free with home antennas.

Sinclair is the nation's largest owner of broadcast stations with 24 in 16 markets. Comcast tops the cable industry with more than 23 million subscribers. The two giants haven't budged since agreeing to extend the expiration of the retransmission agreement from Feb. 4 to March 1.

"Our customers will continue to receive these channels while we continue to work with Sinclair to reach a fair agreement," said Reg Griffin, communications vice president for Comcast's Southern Division.

Without a resolution, Sinclair may shut down signals in about 30 markets including McCracken County and Massac County, Ill. Sinclair Vice President and General Counsel Barry Faber likened the situation to that of a listener recording free radio broadcasts and trying to illegally sell them.

"It's certainly our preference to be carried on cable systems, but at the same time we need to be paid appropriate consideration for cable to have the right to carry us because that's how they make money," Faber said. "There's always a risk that a buyer and seller won't reach an agreement on price."

A similar standoff ended Feb. 2 when Sinclair restored 22 stations to Mediacom Communications cable systems in 12 states. The signals, including WDKA and KBSI, had been cut off Jan. 6 amid failed talks.

Paducah-based WDKA is a MyNetwork affiliate operating under a local agreement with Sinclair. Fox-affiliate KBSI in Cape Girardeau, Mo., is owned by Sinclair.

Sinclair channels were dark for four weeks for 700,000 Mediacom customers mostly in the South and Midwest, including those in Calloway and Marshall counties as well as the Carbondale, Marion, Murphysboro and Herrin areas of southern Illinois. The dispute finally was settled two days before the Super Bowl. Financial terms of the three-year agreement were undisclosed, but Mediacom said that for the first time it was paying Sinclair for retransmission rights.

Mediacom said Sinclair lost more than 40 percent of its viewership on the dropped stations, while industry analysts estimated Mediacom lost about 5,000 customers a week.

If Sinclair pulls its two local stations from Comcast, those cable subscribers won't see Paducah-based WPSD's newscast at 9 weeknights on KBSI.

WPSD will seek compensation from Comcast for its signal when contract talks resume at the end of 2008. Vice President of Sales and Programming David Jernigan said he expects other competitors in the market, such as KFVS-TV in Cape Girardeau, to do the same.

"Originally broadcasters did receive compensation, and then it went away," Jernigan said. "Now the feeling is the cable systems are paying for their other signals -- ESPN, Fox, CNN -- so the broadcast stations should be compensated. We're the most watched channel of any channel on the cable system."

Bill Evans, vice president of news and operations for WPSD, said the issue of retransmission fees boiled over when the Federal Communications Commission required TV stations to carry digital signals. Each station spent millions doing so, only to see the government "auction off" the digital spectrum, he said.

Last fall, a joint venture called SpectrumCo successfully bid $2.37 billion in an FCC auction for 137 wireless spectrum licenses nationwide. That will ultimately allow SpectrumCo -- made up of cable giants Comcast, Time Warner and Cox as well as wireless carrier Sprint Nextel -- to expand their bundled services of voice, Internet and TV to include wireless phone service.

SpectrumCo trumped bids from satellite companies DirecTV and EchoStar (Dish Network). The $2.37 billion bid included $1.29 billion from Comcast.

Considering the big-money game, broadcasters aren't shy about charging for their signals, which they note include locally-produced news, weather, sports and consumer and public affairs programming, as well as network and syndicated shows.

Last year, California media research firm Kagan Research projected that by 2010 station owners will be able to collect nearly $400 million in retransmission fees from cable and another $600 million from satellite firms and phone companies selling TV programming. That compares with $230 million in 2006.

Some industry observers think the fees some broadcast stations seek could drive cable bills up by around $2 a month, but that doesn't change Evans' views.

"The problem I have is that TV has never been free, even back in the '50s, '60s and '70s. It has always cost broadcasters to deliver that signal," he said. "So for someone else to come along and scoop it up (for free) and charge the viewer makes no sense to me."

Evans said the broadcast industry "dropped the ball" by giving away signals without educating viewers as to the ramifications. He also said he wouldn't oppose not charging cable systems if they provided local channels for free, "but they're not going to do that."

Satellite providers also have come out swinging. DirecTV, which aggressively courted Mediacom customers to switch to satellite during the Mediacom-Sinclair contract squabble, claims an 11 percent jump in DirecTV subscribership in the Paducah/Cape Girardeau market from September through December.

"Customers obviously value their local programming, and when you take that away you clearly have a problem," DirecTV Public Relations Director Robert Mercer said.

Mercer attributed the local increase in DirecTV business to marketing of Mediacom customers, as well as viewers' search for better value for their programming dollars. Satellite systems continue to gain ground on cable, as shown by an annual J.D. Power and Associates study. Last year, 29 percent of U.S. households subscribed to satellite service alone, up 2 percent from 2005. The share of cable-only households dropped from 60 to 58 percent.

DirecTV may offer another round of incentives, this time to attract Comcast customers amid the fee stalemate with Sinclair, Mercer said. "Without giving away our market strategy, you can be sure we have a very keen interest in that."

Copyright (c) 2007, The Paducah Sun, Ky.
Distributed by McClatchy-Tribune Business News.
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