tv The Communicators CSPAN April 4, 2016 8:03am-8:31am EDT
and i guess i'd have to say technically we do. there are, certainly, some exceptions due to size that have been associated or created over time. i like to think we don't face the same scrutiny, one, because we really mind our ps and q and take care of our customers the way we should. >> host: is it profitable? >> guest: absolutely. >> host: is cable tv profitable today? >> guest: i guess that depends on how you define cable tv. i don't know that the television element standing on its own is highly profitable. the content costs have become incredibly high. so, for example, i mean, our basic cable tv service, the usual hundred channels and so forth, costs about $85 now for consumers. that's before set-top boxes. our cost for the content portion
only is more than $50, almost $55, maybe $56 now which leaves a pretty small portion that has to pay for electricity, trucks, people, gas, benefits, wages, you know, repair and so forth. so if i were trying to operate a 45,000-subscriber cable tv system in today's world, it would be pretty hard to do just with cable television service. >> host: and, in fact, you were quoted recently in a news article saying as far as television verse is us internet is concerned, it's the internet. >> guest: absolutely. >> host: that's the future. >> guest: yes. oh, absolutely. we're making our plans now to be a, to build a gigabit fiber overlay over our entire system. it will take years to do and cost many millions of dollars, but that's really where the future lies. the television ecosystem seems to be so badly i won't say
broken, but distorted, it's on a, i think it's sort of on an autopilot course toward being unaffordable in small towns like ours. not by me, but by the consumers. >> host: so what does that mean for consumers who want to have cable tv in ohio? >> guest: well, actually, i think the crisis of unaffordability that's coming has to become nationwide with. it will hit smaller markets like ours first, one, because it's a little more expresencive for us to provide -- expensive to provide the service, but also because our consumers have less income. if you look -- if you compare a massillon, ohio, to a dallas or los angeles, median household income might be $30,000 compared to $55,000. it's more difficult for people in smaller communities to just afford cable television. i think we need to solve it
with -- consumers will solve it themselves. they will stop subscribing to the expensive sat9 right-delivered programming networks and rely more and more on a combination of broadcast television that we can deliver in a bundle and supplement that with what they want from the internet. >> host: you talked, mr. gessner, about some of your costs. what makes up those costs? is it the cost of buying television from lifetime, whatever other channel? is it the cost of providing the local stations? >> guest: it's a mix. the program content, as i said, is about $55, $57 per customer, per month, and that's a combination of broadcast television as well as the satellite networks. the bulk of the dollars are for satellite networks, the broadcast television is a smaller dollar amount, it's probably growing the fastest because they started at lowest,
and it's on a parabolic curve going upward. the tough element to deal with there -- toughest element to deal with is regional sports. we have three regional sports networks x in a very short order, they will be $10 per customer, per month. it's the largest single cost, regional sports. >> host: and how bad because of ohio state's proximity to massillon? >> guest: in terms of rates, probably 35%. but the indians have a -- the cleveland indians have a channel, the cavaliers have a channel, so so those three, all owned by fox, are probably the most problematic because they're three really expensive channels, but they come together into one company,. >> host: matt polk ca is also with us, president of the american cable association. you just had your annual meeting here in washington, d.c.,
mr. polka. what did you just hear in our little conversation? >> guest: it's a typical story of our members. 800 members in all 50 states serving 7.5 million customers. within our 800-member companies, we have half of our members that have a thousand customers or fewer. 80% of those have 5,000 or fewer. we're made up of traditional cable operators like bob who's the chairman of our corporation, we have companies that were originally telephone providers. so we have a spectrum of small businesses providing advance communications in rural areas all across the country which is why we come to washington, to tell our unique story, and why we've been doing it for 23 years. >> host: as i asked mr. gessner, do you face the same issues they face at the ncta, the comcasts, the cox face? >> guest: we do.
>> host: do you agree? >> guest: we do. bob's family's been involved in cable for many years. many of our members literally were the companies that founded cable in their area out of necessity. we still provide that service today, so we are very involved and very invested in the cable industry. but as independent operators, what we've learned over the last 23 years is washington pretty much operates on a one-size-fits-all basis. let's craft regulations or laws that fit across the board. but in our smaller markets and unique areas, there's just a difference. because in many cases, in bob's community and others, you get down to 20 moments per mile -- homes per mile. and then with competition today, you might be down to 15 or 12 or 10 customers per mile where it costs the same amount to provide that service over a much smaller area and a longer rate of return. so we've always said regulations apply disproportionately to our members, and that's why we need to fight.
what's really at stake here is our customers' broadband future, and that's why we were here at summit 23, to tell that story in washington. >> host: all right. one of the issues that was discussed, skinny bundles, a la carte issues. are you in favor of being able to allow the customer to pick and choose which channels he or she wants? >> guest: absolutely. and i have been for years. i don't believe that a la carte could ever work because -- ands this is just my belief -- my belief is those content9 companies like a turner which owns eight different channels, i think you'd have a very difficult time forcing them to break up their own bundle. but i don't see any reason why we could not have a process that i would call a la bundle. the consumer wants one or more of the turner channels, they have to buy all of them.
those would be terms set by turner. and the same thing goes with viacom and esp n/disney, so forth. >> host: and if they did not want sports channels, would their costs, as you indicated, go down quite a bit? >> guest: it's really a -- it's very complicated. most consumers think, well, gee, i have 80 channels, and it costs $80, so it must be a dollar a channel. that, obviously, is not going to work. what really complicates it is the requirements established by the programming networks themselves that don't allow us to break up that bundle. you know, for example, you know, a fox and all of their, all of their networks will require that they be carried on the most widely distributed level of service. and so does everybody else. so really what we end up with is this bundle of bundles that everybody has to take x. as an operator, i would love to disago redate that bundle and --
disaggregate that bundle and sell it to people as they wish. of course, most consumers don't recognize that if that happens, the price of the individual channels or even the bundle of channels is going to skyrocket because those companies have to meet their targets for revenue, or they can't pay for the content. so, you know, everybody use withs espn as the example. espn now is a $6-a-month per-customer channel. if you made it available a la carte and have the people took it, it would be $12 a month. if a quarter of the people took it, it would be $24 a month. that's just the way it's going to work. and then you throw in the problem of advertising revenue which is a big source of their revenue, you know? fewer homes, fewer potential eyeballs means higher rates, and, again, more expensive. >> host: what's the aca's position on bundling? >> guest: we believe that it's important for consumers. consumers want choice.
we see to it today with our broadband plan. consumers are using their iphones, their cell phones, their ipads, their tablets, their laptops. they're enjoying choice, and they're coming to us saying can you give us more choice on cable television. i think choice, the desire of consumers to want more choice is really going to move towards greater choice maybe even a la carte, because consumers are going to demand it. simply because they're used to it now, they like to watch the programs, they like to watch when they want to watch it on the device they want to watch it. so they're going to force us to think about how we can make a difference. which is why what the fcc has noticed recently with a notice of inquiry on programming issues is so vitally important to us and to our members. the fcc for the first time is asking questions about how are these programs carried, how are they bundles, what are the requirements that operators have to deal with, how can independent programmers have more of an impact in getting their programming on the channels despite the big
bundles? and we're happy to be part of that discussion. >> host: please. >> guest: i was going to say, i should have said this right up front. consumer choice and the request to be able to purchase what you want and pay for what you is ask is probably the number one consumer comment or question about television. they say, you know, i can't afford to pay this much, i don't watch most of these channels, why can't i just buy what i want, pay for what i want and take the rest of the stuff away from me? and as cable operators and locke operators who -- local operators who really are concerned about our consumers, we'd be fine to deliver that. but we just simply cannot do it because of the restrictive contracts that are required by the content providers. >> host: now, but if i were an espn and you said, no, we're not going to carry -- we can't afford espn anymore, i'd say,
you know what? some of the big guys can, so i'm going to say good-bye to those 40,000 customers and not worry about you. >> host: peter, there have been cases already with -- where over the past couple of years they've dropped programming. they've done pretty well. they haven't had the competition i think was thought of because consumers get it. they get the fact that right now because of these restrictions that bob's talking about, they have to buy a big bundle of programming at a very high and increasing rate when what they want is smaller bundles, greater choice, greater flexibility. which is why you have members today within aca actually trying to give consumers more choice, trying to launch skinny bundles. at the same time, it's the largest content programming companies that in many cases are fighting that opportunity that our members are trying to give to consumers. so it is a huge issue out there. and it really only comes back to what we as smaller providers are trying to do, which is to give
our customers what they want. listen, we've worked with them for many years, they've enjoyed the bundle. we've talked about how we, as smaller providers, have launched independent programmers for many, many years. many of them today are part of the large conglomerates. but we've been part of that ecosystem, and we have always wanted to give our customers what they want. today they're saying the bundle's too big, it's too expensive, we want more choice, and we're trying to give it to them. >> host: a couple months ago michael powell of the ncta was on this program, and we talked about set-top boxes, and he said his members would love to get are rid of their set-top boxes. >> guest: sure. >> host: said it's a big frustration. do you agree with that as an operator? >> guest: yes. >> host: why? >> guest: there's been a great deal of discussion about set-top boxes recently because of the fcc's proceeding, and i think it starts with the basic misunderstanding of what's included in a set-top box.
it's not just a $250 mini computer that we're pieing and putting -- buying and putting in somebody's home, but there are data costs associated with it, there is a user interface cost that we pay for every month, and then comes the service element. a call center that'll answer your calls and explain how to use your remote control, technicians that will come to your home and plug it into the wall and put new batteries in your remote control. all of those costs just add up so fast. and then, of course, after five or six years, you're going to replace that box. so, you know, the set-top box charges that we have now cover the cost of the box, but it's really not a highly profitable part of our business, and it is, it's very complex. consumers don't want to learn how to use their home electronic equipment, so they call us, and so we have this constant churn of phone calls and service calls to support those boxings. if there was an easy consumer
interface through an application on a smart tv or a tablet or computer that consumers like and enjoy, great. we don't need to keep making the millions and millions of dollars of capital investment in new customer equipment every year. >> host: matt polka, the fcc on their recent vote onset-top boxes says it is to increase competition. >> guest: we are in complete agreement with the industry, with ncta and other operators and set-top manufacturers, saying that this is a problem in search of a solution. or -- i always get -- a solution in search of a problem. [laughter] >> guest: there you go. >> guest: a solution in search of a problem. chairman wheeler's talked about this rulemaking as unlocking the box. it's actually, in our view, opening a pandora's box because this rulemaking is so vague, in our view, to create a standard which is yet to be determined about what box technology should be in the home, what gateway devices, what head-end
reconfigurations, what new types of technological mandates will be imposed on cable operators that we have no idea the capital costs that will be imposed on a company like bob's that will actually take away broadband investment which the fcc ironically says is some of the most important things they want our members to do. so we do not believe that this is a sensible rulemaking that needs to move forward and, frankly, when i look at the impact on our members, it will, once again, have that disproportionate impact on smaller providers. and that's why we've said this is not a good idea. >> host: why can't somebody have an app that does the same thing -- >> guest: absolutely. >> guest: they can, they do. if you go to ncta which is just right around the corner here, they have a very nice display or exhibit of i think there must be four or five different commercially-available set-top boxes, whatever you want to call them, that run apps. so so they're roku box, apple
tv, tivo box, game consoles, smart tvs, blu-ray players, chrome cast. all of those represent a new way of watching television on connected devices. but there is not a government-mandated standard by which to do that. and that's the part that becomes difficult for us. there was a government-mandated standard until last year when congress wisely said do away with it, it's not working. and this just seems to be a continuation of an effort to say let's have a government-mandated technology platform that consumers are already chosen not to purchase. >> guest: rather than unlocking the box, we agree with what commissioner pai said about consumers who said they don't even want a box. the fact is that our members are providing choice through competitive set-top boxes, through apps, through giving consumers choices about which box to purchase and really being
part of, again, coming back to the customer, being part of that relationship with the customer to determine what is it that they want most x how can we provide it. and the fact of the matter is, if this rulemaking does go forward, we'll spend years, we'll spend hundreds of millions be not billions of dollars, how much did the cable industry invest in the old cable card regime which congress two years ago said we need to get rid of it because it hasn't worked, it hasn't created that competitive set-top box market. it would be back to where we were a couple of years ago. congress said let's get rid of the cable card. fcc, if you want to do a study going forward, that's fine, but it didn't tell the fcc to start a new rulemaking. even so, with the rulemaking we as an industry have come to the commission and have said we have other proposals that we would like you to consider in addition to this set-top box proposal. however, that's not part of the
rulemaking. it's really the one-way set-top box rulemaking that we have from the commission that's talking about gateway dices and these vague -- devices and these vague standards which would impose hundreds of millions be not billions of dollars. and we think it's time for chairman wheeler to embrace the issues that we as an industry and something he encouraged at the beginning of his chairmanship where he said i hope i can have industry collaboration. we're here to collaborate if the fcc would just listen. >> bob, who's your competition? >> guest: wow. today, directv, dish network, a little bit of time warner as well as at&t u-verse in a fairly large portion of my service area. we also have centurylink and frontier as internet be and phone competitors and, of course, at&t also fits into that. we have some, i guess, some larger backbone type providers
for truly big pipe internet be as well. >> host: what about the chrome tvs, the apple tvs, the rokus, the netflix? do you consider them competition? >> guest: no, i consider them to be more complementary. as i said, i'm a broadband company. i want to make a great broadband product that consumers know they can use to acquire -- and i've tried to make a very careful distinction between tv and video. tv is the old-fashioned, linear television networks that people have known traditionally. but then there's video which is a much more robust, dynamic library concept. but i want consumers to know that my broadband has the best infrastructure, the best network on which they can choose to find the television or the video that they want. so if somebody says i like broadcast t from now -- tv from
now, netflix for other content, more power to them. in fact, we would love to work with netflix to incorporate an app onto our set-top boxes or other consumer devices, but we can't attract their attention. >> host: are all of those companies regulated in the same fashion? >> guest: for the most part. when we talk about video issues, when we talk about internet service provider, broadband issues, the fcc's open internet order imposing title ii regulations on our member companies, here again we have members through their own desire -- the government didn't need to tell them, deploy broadband. we have been connected to provide broadband, but here the government comes and tells us we need to regulate you like a utility. which puts at risk literally billions in dollars at capital. bob talked about gigabit. we have members, small companies across the country launching gigabit service not because they were told to, but because they wanted to with their consumers.
so, yes, in many ways with the issues that matter for our future when we talk about broadband connectivity, giving consumers the capacity and speed we want, looking to our broadband future, we are in sync with all of our membership and fighting for that future. >> guest: i'll ask you to clarify your question, you used a pronoun there, "those companies." which companies? the chrome casts and netflix or our infrastructure competitors of directv and dish? >> host: i'll let you define that. >> guest: okay, because there is one -- if i have a grave concern about the internet, it's that the network neutrality that the open internet order created didn't do its job. it really does not address the entire network. and i think many consumers have been fooled into thinking that network neutrality applies to the whole network, and it does not. when you think about the internet, there are two gates to the internet. i'm one of them. i'm an isp. people come to me to reach the
internet. at the other end of the internet is another gate, and that's the gate that lets content on to the internet. and it's that gateway that's controlled by the so-called virtuous edge providers. and those are people like netflix, viacom, cbs, google and so forth, all those edge providers. my gate is regulated by the open internet or by network neutrality. the gate that's controlled by the network -- by the edge providers is totally unregulated. they are free to block, throttle, redirect or demand paid prioritization. so it's definitely a tilted playing field, and my concern is that edge providers are going to start to cablize the internet. that was the callization of the internet is a phrase coined by a new york times reporter that envisions a time when edge providers come to the isp and
demand payment, otherwise their content will be unavailable to those consumers. and that's already happened. it's happened in exchange for cash, and it's happened as leverage in negotiations. and i'm just afraid that when a really big edge providers gets ahold of that concept like a facebook, that they can add dollars of cost to every single internet subscriber over which they have no control and for content in which they have no interest. >> host: bob gessner, we've talked about some of the issues you face with the fcc and with washington, but what about with the state of ohio and the city of massillon? >> guest: gosh. my local franchises, we have about two dozen local franchises, no problem. we're local. we have 165 local employees, you know? my family's been involved there for a -- 175 years, so we focus
on those local communities, and we don't really have any issues there. the state of ohio is one of only a handful in the country that have statewide franchising. so the state of ohio is our franchising authority. we appeal to them for our local franchise. but because of a, i guess an abundance of competition with, especially in the television market with directv and dish and at&t covering pretty much the whole state, the tate -- the state assumes that competition will dictate the winners and losers, so they don't feel the need to be intimately involved in what we do on a day-to-day basis. we pay a franchise fee to our local communities, but the selection of the programming services, the setting of rates and the establishment of service policies is all up to the local company. >> host: matt polka, we have
about a minute left. what is another major issue that was discussed at your meeting that you want to bring up? >> guest: retransmission consent. >> host: which is? >> guest: we've talked about this many times. the ability under law for broadcasters to demand payment or consideration in return for allowing us as cable operators to carry their broadcast signal. it's been an issue that's been around since 1992 that has continually and increasingly harmed consumers. there have been an historic amount of blackouts where broadcasters or have blacked out their signal because they couldn't reach an agreement with the cable operator. historic amount of blackouts. the federal communications commission, to its credit, has undertaken a rulemaking to make greater balance so that consumers are not harmed by retransmission consent blackouts by broadcasters. we expect to see something over the next couple of months that would prohibit online blocking which bob talked about where a broadcaster could not block on line content as a result of a
retransmission consent dispute. couldn't pull a signal right before a marquee event such as the super bowl or the oscars or something high profile, march madness, for instance, and other sensible ideas to create greater balance and get consumers out of the middle of this negotiation. so that's a big one that we have talked about, and we'll continue to talk about it until we get the problem fixed. >> host: does retrans keep you up at night sometimes? >> guest: yes. >> host: why? >> guest: well, because we have absolutely no leverage when it comes to a broadcast television network. there is no leverage. a good friend of mine summed it up in this way, we pretend to negotiate. we go back and forth a few times, but eventually they just say this is it, take it or leave it. so it does keep me up at night. not because of the cost or because of the associations, but because of the impact i know it will have on my customers when, you know, they wake up on january 1st and a television