ACA's Polka: Small cable operators may exit pay TV business

with Matt Polka, President & CEO of the American Cable Association

Matt Polka, ACA

Polka (Image source: ACA)

American Cable Association President & CEO Matt Polka says that he expects some of his member cable companies will exit the pay TV business and focus on selling broadband Internet access to subscribers turning to Internet video for home entertainment. The rising cost of programming has forced some members to fold, ACA said in a recent FCC filing. With the lobbying group for small and mid-sized cable operators holding its 20th annual ACA Summit in Washington, D.C., this week, Polka and top executives from WideOpenWest, Massillon Cable TV and other ACA members have scheduled about 200 meetings with members of Congress and the FCC. In an interview with FierceCable, Polka details ACA's views on issues like usage-based broadband, lobbying efforts, and its unique partnership with Time Warner Cable (NYSE: TWC) and DirecTV (Nasdaq: DTV), Verizon (NYSE: VZ) and other cable rivals pushing for retransmission-consent reform.

FierceCable: Are there any smaller members of ACA that have gone out of business in recent years because of the rising cost of programming?

Matt Polka: Yeah, there have. We can't always precisely pin down the reasons. We put in a [FCC] filing a few months ago that highlighted the loss of small systems across the country, and there were a number of them, some of which were related to programming [cost] increases, retransmission consent, the disproportionate cost of regulation on smaller companies versus companies that have a much larger subscriber base over which to spread the costs. That is a real concern, with 80 percent of our member companies having 5,000 or fewer subscribers.

FierceCable: Are there any ACA members testing or deploying usage-based broadband packages?

Matt Polka: In some very limited circumstances. Members that I've talked to are mostly experimenting with using very reasonable data caps. It's a plan for the future, because we know that the amount of capacity and speed that is going to be demanded is going to increase. We want to provide it, but we have to in a reasonable way so that we begin to educate our customer in terms of their amount of usage, and say, 'As you use more and more and more, there might be a request for some additional payment.' But we must set the data cap so high … and really only deal with that very small segment of the population that gets anywhere close to the caps. It's more experimental right now, but clearly as we move toward more of a fully broadband economy, and a broadband based business, it's going to become more of a routine part not just of our members' businesses, but other operators as well.

FierceCable: Do you think we'll see the day when some operators exit the traditional subscription video business, and rely solely on selling broadband Internet access and delivering over-the-top video programming to subscribers?

Matt Polka: I think we will see more of our members moving toward the broadband-based business, and I think that means for them their openness and willingness to consider providing video options to their customers that might be different than traditional linear cable linear services they provide today. More than likely, you'll probably see some mix [of subscription video and high-speed Internet service], particularly as consumers get more and more used to over-the-top [video].

FierceCable: ACA has formed an alliance with DirecTV and Time Warner Cable to lobby together on issues like retransmission consent reform. Can you tell me about the relationship you have with those companies?

Matt Polka: That's our American Television Alliance, which includes DirecTV, Time Warner Cable, Cablevision (NYSE: CVC), USTA (United States Telecom Association), Verizon, many of our member companies. You also have [larger cable MSOs] like Brighthouse Networks, and public interest groups like Public Knowledge. Time Warner Cable brought us all together and said, we all may not specifically agree on what the solution should be, but we know by our collective experience that these rules are broken and need to be changed and updated, and we collectively ought to come together to encourage Congress and the FCC to do that.

There's tremendous diversity of participation within our group--the only ones that are opposed to changing the retransmission-consent rules are the broadcasters themselves. Everybody else knows--regardless of whatever MVPD you're in, that these rules need to be changed. ATVA has been very successful in highlighting the need for reform. It also very precisely points out the fact that the broadcasters are just in a protective anticompetitive mode, where they want to hold on to rules of the past which give them essentially monopoly protection just so they can charge more and more for our right to continue to receive what they call free TV. It's been a very good group, and one that we're proud to be a part of.

FierceCable: NCTA hasn't taken a stance on retransmission-consent reform, since Comcast (Nasdaq: CMCSA) is also one of the biggest station group owners. Does that give ACA an opportunity to recruit Time Warner Cable, Charter Communications (Nasdaq: CHTR) and other major MSOs for membership?

Matt Polka: I've never thought of that. Obviously the companies differ from our members in the sense that our members are smaller, they're incumbents in smaller markets; they're in rural areas. The nature of some of our members versus the larger cable operators is not the same. As a likelihood of that ever happening, I wouldn't think so. But what we are happy to do is recognize that we as operators--whether we're large cable operators, small cable operators, competitive cable operators, satellite providers, telco providers--all share in the burden of having to deal with outdated rules and regulations that are long overdue for reform.

FierceCable: How much of a challenge is it to get your issues on their radar screen when lawmakers are focused on gun control, healthcare and the federal budget?

Matt Polka: Without a question, the major national issues of the day--sequester, entitlements, gun violence--those permeate everything. From a communications perspective, in our smaller world, things are a little bit different. We've had the ability to have very frequent discussion to move the ball forward, as opposed to staying stuck in neutral. I think one of the reasons for that is that communications by and large have been a bit more bipartisan in nature than maybe some of the major issues that divide the parties, and all of the members of Congress on the key committees are all generally consumers. From a consumer's perspective, they understand these issues--it's tied in with our broadband issues--and it's something that they all care about. Make no mistake, we don't underestimate any legislative effort. It's hard work for Congress to move things forward, and we know that, but we're committed to the long term.

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ACA's Polka: Small cable operators may exit pay TV business