September 04, 2014
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Mediacom's Larsen on programming costs, Local Choice and TV Everywhere challenges
Just as you can tell a lot about the state of the overall economy by the perspective of its middle class, so it stands to reason that the status of the pay-TV industry can be nicely summarized by a mid-sized cable company operating out of the Heartland. For that insight, we talked to the outspoken Thomas Larsen, group VP of legal and public affairs for Mediacom. The privately owned operator, based in Blooming Grove, N.Y., serves 1.3 million customers in 22 states across the Midwest and Southern U.S. From rising program costs to the fiber-fueled, gigabyte-speed broadband chase, we got Larsen's brief take on a broad range of issues here.
FierceCable: Smaller operators are talking about moving out of the video business if programming costs continue to rise. What's Mediacom's position on this?
Larsen: There is no doubt that rising programming costs combined with coercive wholesale bundling practices are putting a huge strain on the traditional pay TV model. It is especially hard on the smaller companies who are paying the highest rates while attempting to serve many of the areas where disposable income is limited. I think no matter where the video business ultimately ends up, there has to be a system of delivering content to the home. In our markets, we offer the most advanced delivery system and are in the best position to aggregate content on behalf of the consumer. While the model will likely undergo some changes, I still believe we have a future in the video business.
FierceCable: What's Mediacom's position on Local Choice? Do you think it stands a chance of passage? And is it a good thing for the TV industry?
Larsen: Local Choice is the most complete retrans solution we have seen. It preserves retrans revenue for the broadcasters, eliminates blackouts entirely and gives consumers more choice. The transparency created by Local Choice would actually give the station owners a weapon in their fight against the huge reverse retrans payments being extracted by the networks. I expect NAB to use every weapon in its arsenal to try and kill Local Choice, but I still think it has a chance to pass for a number of reasons.
Local Choice came out of the gate with bipartisan support from two very powerful senators, Rockefeller and Thune. It is voter friendly because it addresses two big consumer issues, blackouts and lack of choice. Plus, every time you see a blackout like Raycom's recent blackout of DirectTV (NASDAQ: DTV) customers in 37 markets, Congress is reminded that this problem is not going away without a legislative fix. Local Choice is the best, most consumer friendly solution on the table, and I think it would be a step in the right direction for the TV industry if adopted by Congress.
FierceCable: Why is it that when we talk about rising program costs the finger always seems to get pointed at broadcast retrans? Broadcasters still deliver the biggest audiences and programming costs are spiraling on the cable side, as well.
Larsen: The broadcast stations are carried on the basic tier, so rising retrans costs impact 100 percent of cable and satellite customers. When the cost of retrans, as FCC Chairman Wheeler pointed out, skyrockets nearly 8,600 percent between 2005 and 2012 and there are well over 100 broadcast blackouts in 2013 disrupting the lives of tens of millions of consumers, it is almost impossible not to focus on retrans. I do agree that programming costs are spiraling out of control on the cable network side, as well. However, the same networks that are driving up retrans costs by demanding exorbitant reverse retrans payments are also the same networks that own most of the expensive cable networks. So, pointing the finger at the cable networks is not a very effective defense of the retrans regime.
FierceCable: What has been the biggest challenge for Mediacom in terms of deploying TV Everywhere? Licensing? Security?
Larsen: I think it is little bit of everything. Licensing is the first hurdle we need to clear. In some instances, we were able to obtain TVE rights early without having to wait to renegotiate a global agreement. In other cases, it takes more time to get the TVE rights because they are wrapped up into a larger deal. We have gotten better at the technology and authentication piece of the puzzle, but, early on, it definitely took time and resources to get our TVE platform up and running.
FierceCable: Does Mediacom see DOCSIS 3 as a viable technology for competing with the fiber competition?
Larsen: Using the DOCSIS 3.0 platform, Mediacom offers residential download speeds of 150 Mbps in most markets, and as high as 305 Mbps in others. If you consider that most CPE (wireless routers, etc.) in the marketplace today are rated to operate at speeds well below what Mediacom is providing, our DOCSIS 3.0 technology is well-positioned to compete with the fiber to the premises companies. On the commercial and enterprise side of the equation, we are already offering Gigibit+ fiber solutions through our Mediacom Business division. The great thing about the cable industry is we won't stop innovating. In the next two years, the Gigasphere platform will be ready for deployment, and cable companies will push the Internet speed barrier even higher.