Competitive network trade group INCOMPAS, along with the NTCA and small ISP Rocket Fiber, are pitching a video programming purchasing cooperative to the FCC and urging the commission to require Charter (NASDAQ: CHTR) to serve as anchor member as a condition of its proposed merger with Time Warner Cable (NYSE: TWC) and Bright House Networks.
Representatives from the companies recently met with FCC officials to discuss plans for the cooperative, saying it would provide a "structural, market-based remedy" to the potential harms caused by the formation of New Charter and offer smaller MVPDs a more cost-effective path to offering linear video that could be bundled with broadband services.
"It would enable broadband competition and incent broadband deployments across the country in residential markets of all sizes—rural, mid-sized, and urban. It would lay the foundation for a new chapter of true, broadband competition in the residential marketplace," the groups said in an ex parte filing.
NTCA said many of its members lose money on the video side of their businesses. Having Charter's programming purchasing leverage as part of a buying cooperative would help alleviate those losses, NTCA, adding that if Charter refuses to participate, then the association opposes Charter's merger application.
Rocket Fiber CEO Marc Hudson said his company is having difficulty securing video programming distribution rights, which it says it needs in order to compete with larger incumbent MVPDs. Hudson said without the cooperative, Rocket Fiber would be forced to sell video at close to cost or at a loss to compete on price. Were it able to offer video programming at a competitive price, Hudson said his company and others like it would be able to use the increased margins to accelerate the pace of their broadband infrastructure builds.
INCOMPAS offered a presentation that went into greater detail about the proposal, which would establish the cooperative as a non-profit. The group specified that the total number of subscribers represented by the cooperative will be capped to 24 percent of households that subscribe to MVPDs, or that of AT&T/DirecTV, whichever is lower.
The cooperative would negotiate master programming agreements with various programmers for national programming rights, and members would be required to purchase all their national programming from the cooperative. Members would not be permitted to negotiate outside of the master agreements. The largest member, in this case Charter, would serve as the negotiating member.
Of course, the National Cable Television Cooperative is already operating in a similar function for smaller MVPDs so it's unclear if and how the NCTC would work alongside another video programming purchasing cooperative. Some larger NCTC members like Cable ONE have been moving away from video distribution, demonstrating the difficulty some smaller MVPDs have in turning a profit on video.
The NCTC did not immediately respond to a request for comment.
- read this FCC filing
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This article was updated to reflect that NTCA, not NCTA, filed with the FCC.