October 1999
"Priming The Pump": The Role of Retransmission Consent in the Transition To Digital Television
By Stuart N. Brotman

I. INTRODUCTION

"Throughout the last several years," wrote former FCC Chairman Richard E. Wiley recently, "the development of digital television (DTV) has been plagued by a 'chicken and egg' problem, that is, the new technology cannot really take off until reasonably priced receivers are introduced, and such equipment will not be available until digital programming is abundant." ¹

In recent months, one key element of the equation - high-definition digital programming - has begun rolling out on both broadcast and cable television networks. Equally important, by virtue of both existing and newly-crafted digital retransmission agreements between major broadcasters and cable multiple system operators (MSOs), the negotiated carriage of digital broadcast signals, combined with an increasing array of digital basic and pay programming, represents a "priming of the pump" for a more accelerated sale of digital receivers and set-top boxes at the retail level.

This paper will provide a summary of recent marketplace digital television developments, with particular focus on the expansion of available programming and the crafting of retransmission consent agreements to enable widespread availability of leading broadcast networks on cable television systems. It also will link these developments with trends regarding digital television receiver sales and with the provisions of the Cable Television Consumer Protection and Competition Act of 1992 ² that articulate the marketplace benefits of retransmission consent. These benefits remain constant as the transition from analog to digital takes place.

The paper's intention is to provide a broader perspective to industry participants and to the communications policymaking community as it continues its deliberations about how best to implement the transition to a digital broadcast television system. In particular, it addresses whether government intervention should be substituted for marketplace forces regarding cable carriage of digital broadcast stations.

Viewed from the vantage points of broadcasters, cable operators and consumers, retransmission consent in the digital domain, as it has proven to be in analog television, should be the preferred policy option. The benefits of the process, based on past experience, are readily apparent in this transition.

Retransmission consent is the product of marketplace negotiations that leads to carriage of digital broadcast programs most likely to appeal to audiences because of the underlying network source of such programming. Retransmission consent also replicates the dynamics at play in the original introduction of television itself in the early 1950s and the attendant growth in set sales.

Already, digital retransmission consent agreements cover a large percentage of today's total U.S. cable subscriber universe, which will allow high-definition broadcast source movies, prime-time series, late night entertainment and sports to be carried in cable homes. When combined with the rollout of high-definition digital programming for digital receivers on cable networks such as HBO and The Discovery Channel, many cable subscribers will encounter a menu of attractive, high-quality program offerings. Over time, as more digital broadcast programming is carried as a result of retransmission consent, viewers may perceive an expanded menu of popular programming that represents a "critical mass" for them to buy digital receivers - an essential step in a successful transition to a digital broadcasting system. (See Appendix: Chart 1).

² Pub. L. No. 102-385, 106 Stat. 1460 (1992) (codified at 47 U.S.C. §§ 521-555 (1994)).