National Cable & Telecommunications Association (NCTA) President & CEO Kyle McSlarrow testified today before the House Committee on Energy and Commerce at a hearing entitled "Status of the DTV Transition: 154 Days and Counting." A transcript of his remarks can be found.

In many respects, I think the inter-industry cooperation to educate consumers to make available the information they need to know about the tools that they should be equipped with to manage the transition has gone very well. And I should say that we are very pleased and I want to compliment David Rehr and other leaders in the industries for what they have done to ensure that cooperation has moved forward. But, I do want to flag what is potentially a coming storm – which is called retransmission consent. I know on the first panel there was an exchange of views about this, but I think it’s important to understand the context.

Retransmission consent was added to the legal landscape in 1992, a time when the marketplace was very different. And by and large, over the last 15 years, most broadcasters, most cable and satellite operators, have managed to work through that in a way that there is a rough equivalence of value being exchanged and that customers have been well served. But it is increasingly clear with the new election coming up October 1st in terms of broadcasters electing to be must carry or pursuing retrans, that with the economic pressures on the broadcasting side, with more and more equity or hedge funds investing in broadcasting sector looking for a quick buck as opposed to the long-term view, that there is going to be greater tension.

And it is important to point out that retransmission consent is not a free market negotiation. Every broadcaster walks into a room knowing that at the very least they can insist on must carry carriage or if they feel up to it, they can choose to pursue retransmission consent negotiations. So, it is the classic heads I win, tails you lose proposition. When they enter the negotiations, they then know that every cable customer has to, by law, buy a package with all broadcast stations in it, before they can buy any other cable network including premium networks. And, the networks know, and the broadcasting station groups know, that you can’t as a cable operator or satellite operator go out and negotiate for another signal with similar or identical programming because network non-duplication and syndicated exclusivity rules prevent you from carrying an out-of-market signal that competes with what is essentially an exclusive product in a local market. So, it’s not a free market negotiation, and as I say, the overwhelming number of cases I’m confident would probably be worked out at the bargaining table. But it’s clear that increasingly, there is tension and if you go by public statements from some broadcasters, there’s a desire to ratchet up dramatically, in some cases 500 percent, the costs of those signals that would be carried by consumers.

Now this is relevant in the short term to the digital transition because most of the retrans agreements will expire around December 31st of this year. So, we have been having conversations with our friends in the broadcasting industry about a quiet period, but the problem is if you are putting consumers to the choice of either paying a higher bill, or the cable operator insists on protecting the interest of the consumer, then the threat is going to be the broadcaster is going to pull the signal. And when are they going to do that? Well they are going to do that in January, the precise period of time the NAB’s voluntary quiet period does not cover. So you have this odd lapse of time where the food fights are undoubtedly going to break out where consumers have two choices: pay a higher bill or lose a signal.

I would urge this Committee to make clear in unmistakable terms, in the short term, to broadcasters around the country that the digital transition is not business as usual. Cable operators, satellite operators, are carrying -- in the case of cable operators we are carrying must carry stations in a dual format, which we didn’t think we were required to do, but we voluntarily agreed to do that. It was incorporated into an FCC order. Everybody’s leaning forward. This is not the time to confuse consumers about what is happening. And I should hasten to add, this is not about leverage in the marketplace. I heard you Mr. Gonzalez before, and I agree with your point. It should be short. Whatever the deal is, whenever it is struck, it should be retroactive back to the date of the expiration of the agreement. And then I think for the committee there is a long term challenge that we’d like to work with you on reforming retransmission consent.