WASHINGTON, D.C. – NCTA President & CEO Kyle McSlarrow sent the following letter to Members of Congress today, accompanying an economic analysis prepared by Kane Reece Associates showing that a mandatory multicast regime would cost cable operators a minimum of $4.2 billion and up to $115.6 billion in lost bandwidth costs. The text of McSlarrow’s letter follows:
“Dear Member of Congress:
In a letter I sent to you yesterday, I urged you to oppose broadcaster demands that Congress require cable operators to carry, without compensation, any and all of the multiple streams of digital programming (beyond their primary video signal) which broadcasters who choose the “must carry” option for their digital signals may provide. Accompanying my letter was an analysis prepared by former U. S. Assistant Attorney General Charles Cooper and his colleagues at the law firm of Cooper & Kirk, which concluded that a multicast must-carry requirement would violate the First and Fifth Amendments. As that paper explained, government mandated multicasting requirements would constitute a “taking” of cable operators’ property, which, in the absence of “just compensation,” would be prohibited by the Fifth Amendment.
As we have discussed these issues over the last few months, Members of Congress have asked what the financial consequences of a multicasting taking might be to the U.S. Treasury.
Today, I am providing you an analysis that shows just how large that liability could be. To obtain an estimate of the value of the property rights that could be “taken” if Congress required mandatory carriage of multicast streams, NCTA retained the market valuation firm of Kane Reece Associates, Inc. Founded in 1986, Kane Reece is experienced in providing valuation, management, and technical consulting to the communications, entertainment and media industries. The firm’s valuation practice is among the largest in the world serving these industries.
Kane Reece used four separate approaches to estimate the cumulative value of the cable broadband bandwidth that a multicast must carry provision could require. Under the most conservative valuation approach used by Kane Reece, the cost to cable operators to implement a mandatory multicast regime (and thus the potential claim against the Government under the Tucker Act) is in the $4.2 - $5.6 billion range. Under an “opportunity cost approach” – which Kane Reece believes is a very reasonable methodology to use in this instance – the cost of a multicast regime to cable operator exceeds $115.6 billion.
The cable industry supports the important public interest goals to be achieved by the return of the broadcasters’ analog spectrum. But there is no reason to reward broadcasters with multicast must carry rights simply for returning spectrum that they were never meant to keep any longer than necessary to facilitate the digital transition. And there is no reason to do so when such a taking of property could expose taxpayers to enormous claims against the Treasury.
If you have any questions about the Kane Reece analysis or the Cooper paper, my staff and I stand ready to meet with you and your staff at your convenience. Thank you for your consideration of these important issues.
Sincerely,
Kyle McSlarrow”
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