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Mediacom-Sinclair Dispute Part of Larger, National Battle

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CEDAR RAPIDS - The Mediacom-Sinclair Broadcast Group dispute that threatens Orange Bowl viewing for Hawkeye football fans echoes the national push-and-shove over retransmission fees.

Network television stations across the United States, many of them struggling with sagging ad revenues, are using retransmission negotiations to wrest more money from cable TV operators and, consequently, cable TV customers.

In fact, the battle royale of retransmission deals of the year is currently going on between News Corp., the owner of Fox, and giant Time Warner Cable.

...A Little History...

Broadcast stations in the early days of cable were prevented by law from demanding payment for their programming. The rules were intended to foster the growth of the cable industry, in part by allowing cable companies to concentrate on new programming unique to cable. Local broadcast stations were seen as already benefiting from the valuable television spectrum they were allocated by the government, and most viewers were already seeing their programming free.

The rules changed with the 1992 Cable Act. That law gave station owners two options when dealing with cable networks. They could opt for good-faith negotiations with the cable networks in hopes of being reimbursed for their programming or invoke "must-carry" requirements that would preclude any payment.

Cable-station agreements run for three years. In the years immediately after passage of the act, most broadcast stations were hesitant to negotiate for payment.

Sinclair General Counsel Barry Faber said that reluctance came mainly from the lack of negotiating leverage broadcast stations had with the cable networks at the time.

Customers were unlikely then to desert cable companies that refused to pay for local broadcast stations, Faber said. The only available alternative to cable for most customers was satellite networks, and at the time they generally didn't offer local broadcast stations.

Satellite networks eventually did, though, and grew to rival cable companies in the number of subscribers in many areas. That emboldened some broadcast station owners to negotiate for retransmission fees. At first, they mainly received only advertising from cable systems as payment for the signals.

Broadcasting & Cable magazine said Nexstar Broadcasting is believed to be the first major broadcaster to obtain cash for retransmission of its stations, about five years ago.

...Two Sides of Local Issue...

The Mediacom/Sinclair dispute is not confined to Sinclair-owned KGAN-CBS 2 in Cedar Rapids and KFXA-FOX 28, for which Sinclair has a management agreement. The companies are negotiating retransmission rights for 22 Sinclair stations in 12 states, said Tom Larsen, Mediacom vice president of legal and public affairs.

Larsen said Sinclair is pushing for payments beyond what are generally demanded and doesn't mind leveraging the inconvenience of Mediacom customers who could lose the Hawkeyes' Orange Bowl appearance. He said Sinclair is in a position to demand more, because it is using several illegal "duopolies," or control of at least two stations in several markets, to strengthen its bargaining position.

Neither side will say how much Sinclair is demanding. Sinclair's Faber has denied a television news report on KGAN-CBS 2 that Sinclair wants 50 cents per Mediacom subscriber. Larsen would say Sinclair is demanding twice what it asked three years ago, when a retransmission dispute briefly cost Mediacom subscribers access to KGAN-CBS 2.

Sinclair is just asking to be compensated at levels equivalent to what Mediacom pays for cable-only stations that have much lower viewership, Faber said. He said many cable-only stations receive 80 cents to $1 per subscriber, and ESPN receives about $3.50 per subscriber from Mediacom.

Mediacom said Sinclair's demands are driving up costs to consumers. Sinclair is just trying to force cable companies to take a harder look at what customers are willing to pay for, Faber said.

Iowa City Cable Administrator Bob Hardy said such disputes could accelerate "a la carte" pricing, when cable companies post prices for individual stations and let customers choose what they want.

...Mediacom and Sinclair have battled before over retransmission rights. What's different this time?...

1) Sinclair has taken over management of a second station in the Cedar Rapids market, KFXA-FOX 28, and is negotiating for it as well as for KGAN-CBS 2.

2) Off-air broadcasting has switched to digital, so customers who want to get Sinclair's broadcast stations over the air with an analog television will have to invest about $80 in a digital converter box.

3) The current Federal Communications Commission is seen as potentially more sympathetic to the cause of cable companies. Mediacom and some cable and satellite TV allies have asked the FCC to intervene in the dispute, claiming that Sinclair is exerting unlawful market influence by negotiating for more than one station in a market.

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