FCC says cable firms need carry just one signal per broadcaster

Sinclair, others sought mandatory broader rule

February 11, 2005|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

In a setback for Hunt Valley-based Sinclair Broadcast Group Inc. and other broadcasters, federal regulators ruled yesterday that cable companies would not have to carry more than one television signal for every broadcast company - a key ruling as the industry shifts toward digital TV.

A digital signal can carry more information without using any more space on the broadcast spectrum. Sinclair and other broadcasters want cable companies to be required to carry six digital channels offered by a local television station - known as multicasting.

But the Federal Communications Commission voted 4-1 yesterday to require cable companies to carry one signal for every broadcast company.

The lone dissenter, Commissioner Kevin J. Martin, said the ruling will prevent broadcasters from investing in multiple digital programming on cable, giving viewers less choice.

In a separate, unanimous vote, the commission said cable companies also wouldn't have to carry both the old analog and new digital stations as television companies make the transition to digital.

Multicasting would open up additional advertising avenues for broadcasters. They said the companies couldn't afford to offer more channels without cable carrying the programming.

Cable operators, however, said they didn't want government to determine their channel decisions and wanted to be able to use channel space for other programming.

Yesterday's FCC decisions were the latest chapter in a continuing fight between the cable and broadcast industries as the 50-year-old analog television system changes over to more vivid and technologically advanced digital television.

In Baltimore, Sinclair has been embroiled in a dispute with Comcast Corp. over whether the nation's largest cable provider should have to pay to carry Sinclair's stations for high-definition digital viewing on its cable system.

The parties came to an agreement in principle in time for Comcast viewers to watch the Super Bowl on Sunday in high definition on Sinclair-owned Fox 45, WBFF-TV. The two companies are continuing to negotiate. During a conference call yesterday to discuss fourth-quarter earnings, David Smith, Sinclair president and chief executive officer, said he hopes the talks set the stage for negotiations with other cable operators.

"In the event that we do get a deal done with Comcast, my sense is that it will kind of lay the groundwork for every other cable company within our industry where we broadcast," Smith said.

"My sense is that it'll become somewhat of a template for other cable companies to look and say, `Well, if Comcast can do the following, then I guess we better be prepared to do the following, given that they're the leader in the industry.' So we'd like to get it done," Smith added.

Sinclair didn't comment on the FCC decisions during the conference call and didn't return phone calls.

The FCC postponed acting on a separate matter yesterday - whether Sinclair should be allowed to buy five stations, including WNUV in Baltimore, from Cunningham Broadcasting Corp. Cunningham is partly owned by Smith's mother, Carolyn.

Regulators are weighing whether Sinclair should be allowed to own two stations in one market. Sinclair manages the five stations in question.

Smith said during the conference call that Sinclair is prepared to appeal in court if the FCC rejects its petition.

As for the decision on limiting the number of signals required to be carried, cable providers cheered it.

"This is a fair and reasonable decision that is right on constitutional grounds and right for consumers," Philadelphia-based Comcast said in a statement. The major trade association for the cable industry said carriage should be negotiated between the individual cable companies and television stations on a case-by-case basis.

"It should not be regulated," said Paul Rodriguez, a spokesman for the National Cable & Telecommunications Association. "The best situation is for cable operators and whoever wants to be carried on that cable system to have talks, and for an agreement to be made by those parties and for the government not to have a mandate on what ought to be carried."

Broadcasters, who asked for the FCC order to reach a larger audience on cable in hopes of increasing advertising revenue, vowed to move their fight to Congress or the courts.

"We think it's an unfortunate decision and it's an anti-consumer decision," said Dennis Wharton, a spokesman for the National Association of Broadcasters. "There's really only one reason that the cable industry has fought this. They don't want to carry free programming to compete with their paid programming."

In its quarterly earnings released yesterday, Sinclair reported a net loss of $5.1 million for the fourth quarter, which ended Dec. 31, related to a $44.1 million, unspecified write-down of goodwill. Net broadcast revenue increased 6.9 percent, to $171.3 million for the fourth quarter, up from $160.3 million in the comparable period in 2003.

For 2004, the company posted net broadcast revenue of $637.2 million, a 3.7 percent increase from $614.7 million in 2003. Smith said the gain was helped by a record year in political advertising. The company booked $32 million in political advertising in 2004, up 31 percent from 2002 and 43 percent from 2000.

Sinclair also increased its annual dividend to 20 cents a share from 10 cents, in anticipation of proceeds of about $254 million from the pending sale of a California station.

The company also said it expects first-quarter revenue to be down because of a slowdown in automobile, telecommunications and movie advertising.

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