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Scalise and the Telecommunications Bill

Jeremy Alford on Rep. Steve Scalise's proposed TV Marketplace Act — and the donations he's taken from the telecommunications industry

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Steve Scalise
  • Rep. Steve Scalise, R-Metairie, says his telecommunications bill doesn't play favorites and is long overdue reform.

It's good to be U.S. Rep. Steve Scalise these days. The Metairie Republican has become his party's top recruiter in the House and he's flying around the country looking for prospects for the fall ballot. Back home, Scalise is almost guaranteed re-election and should be considered a fixture in the 1st Congressional District for the foreseeable future. His fundraising bears that out — but it raises questions as well.

  During the current two-year election cycle, Scalise has received more than $1.1 million in contributions, including $467,000 from political action committees, or PACs. According to the Center for Responsive Politics, which crunched some of the figures for this story, a PAC is a "popular term for a political committee organized for the purpose of raising and spending money to elect and defeat candidates."

  Breaking down Scalise's numbers further, $96,500 came from PACs connected to the communications and electronics industries. It's not the largest sector for Scalise when it comes to PACs. That honor belongs to energy and natural resources PACs, which have given him $101,500. Communications and electronics PACs follow closely behind, though, accounting for roughly 8.8 percent of Scalise's total receipts this cycle.

  Scalise's new best friends have names like Time Warner, CBS, Viacom and the National Association of Broadcasters. It's not that surprising, given that Scalise sits on the House Energy and Commerce Committee, which has a hand in regulating broadcasters. The committee has 23 Democrats and 31 Republicans, including Rep. Bill Cassidy of Baton Rouge, a Republican.

  In contrast to Scalise, however, Cassidy has collected a mere $26,500 from communications and electronics PACs during the current election cycle — $70,000 less than his metro New Orleans colleague. Scalise also raised more during the most recent quarter from television and movie companies than Cassidy has collected in the last six quarters. Cassidy's biggest PAC donors are connected to health care, a major policy issue for the Red Stick representative, who also happens to be a physician.

  Why is all this noteworthy?

  Because Scalise, a systems analyst, is sponsoring the Next Generation TV Marketplace Act to redefine the relationship between broadcasters and video providers. Couple that fact with his fundraising efforts, and his relationship with the telecommunications industry cries out for scrutiny.

  Scalise argues that the current federal laws have become outdated as technology has progressed and entertainment streams have moved online. For example, he says the federal Communications Act was amended nearly 20 years ago, when video providers were basically limited to cable and satellite companies. Today, content can be viewed on desktop computers, laptops, smartphones, tablets, certain DVD players, gaming consoles, wired televisions and a bevy of specialty units that can be used in lieu of cable and satellite boxes.

  The notion that the law lags behind technology is hardly new. Ever since the Industrial Revolution, technology has far outpaced the law. For lawmakers and policy makers, the issue becomes not just how can the law keep up, but how can it do so without wreaking havoc in the marketplace.

  Scalise says his bill would "allow the market to operate in a way that advances innovation and technology, while simultaneously benefiting consumers." To get the wide-ranging discussion moving, and to determine what still works and what should be scrapped or overhauled, the House Energy and Commerce Committee convened a hearing on June 27 to better understand the video marketplace.

  According to his latest quarterly fundraising report filed with the Federal Election Commission, Scalise collected $7,000 just three days later, on June 30, from individuals, businesses and PACs with skin in the game: $3,000 from employees of EATEL, a cable provider based in Gonzales, La.; $2,500 from General Electric, which owns part of NBC; $1,000 from the American Cable Association; and $500 from the president of Bright House Networks, another cable television provider headquartered in New York. About a week and half before the June 27 hearing, Scalise also received $2,500 from Dish Network, bringing Scalise's total from broadcasters and video providers to $9,500 during the second quarter alone.

  As for other receipts prior to the second quarter, here's a sampling of individual PAC donations Scalise has scooped up since he first introduced the proposed act:

  • American Cable Association: $1,000

  • CBS Corp.: $1,000

  • Charter Communications: $2,000

  • Clear Channel Communications: $1,000

  • Comcast Corp.: $7,500

  • Cox Enterprises: $2,000

  • DIRECTV Group: $10,000

  • Motion Picture Association of America: $1,000

  • National Association of Broadcasters: $4,000

  • National Cable and Telecommunications Association: $10,000

  • Sony Pictures Entertainment: $1,000

  • Time Warner: $1,000

  • Time Warner Cable: $10,000

  • Viacom International: $2,500

  • Walt Disney Co.: $2,000

  Scalise insists there are no connections between his bill and the donations. "I've been able to get support from all across the industry," he says. "If you read the bill closely, there's something for everybody to like and dislike.

  "My bill doesn't pick winners and losers. The current law picks winners and losers."

  Over the last few decades, Scalise says, communications and entertainment technology has advanced rapidly while laws governing the industry have remained relatively unchanged. He says there's a need to create a marketplace where video providers would be able to choose whether they want to negotiate with broadcasters and copyright holders — rather than being required to, as under current law — in order to purchase content to resell to consumers.

  The proposed legislation has a simple enough premise: the laws that regulate markets for cable and satellite broadcasting shouldn't apply to the myriad other options that have sprouted up for the new generation of pay television.

  Supporters of Scalise's bill include Thomas Schatz, president of the Council for Citizens Against Government Waste. Schatz says broadcasters have used their positions under the 20-year-old law to deny viewers popular programs as a way to leverage higher rates out of providers. "Additionally, the bill will repeal the compulsory copyright license, in which the government dictates the royalties [video providers] pay to broadcasters for their content, instead of allowing these royalties to be determined by a free market," Schatz says.

  Scalise adds that the bill also would repeal media ownership caps, which limit the number of broadcast stations a single company can own in a given media market, and lift the ban on broadcasters owning a newspaper in the same market.

  Not everyone is happy with Scalise's proposals, however.

  Speaking on behalf of the National Association of Broadcasters, Hearst Television President David Barrett suggests such a setup would favor video providers — and put broadcasters at a disadvantage. "As an industry that creates content, or acquires the rights to content, it is imperative that broadcasters have the right to negotiate over how our content is distributed," Barrett says. "Congress should reject any erosion of the bedrock principles of retransmission consent and market exclusivity because they are essential to the system of broadcasting."

  Retransmission consent is a key element in the current law. It gives local TV stations the option of negotiating "retransmission rights" with cable operators and satellite providers such as Dish and DirecTV. Popular TV stations demand cash or other considerations in the course of such negotiations, but cable operators and satellite providers can refuse to carry stations that demand too much money, or make counterproposals.

  Al Cardenas, chairman of the advocacy group American Conservative Union, supports the existing rules for retransmission and says he's concerned they will be lost unless Scalise's bill is changed. He says the current process helps create a marketplace that ensures broadcasters are compensated by video providers for the use of their signal and content.

  Retransmission consent, which came about when the Communications Act was amended in 1992, requires the involved parties to negotiate for the use of a local broadcast signal. "This prevented the pay-TV industry's previous practice of using the signal for free and then profiting from its retransmission by selling the broadcasters' content as part of their basic service," Cardenas says. It also reflects a fundamental tenet of federal copyright law — that the creator/owner of a "copyrightable work" gets to determine how it's used and reused, and can demand compensation for any use.

  The programming that is most viewed today is still produced by broadcasting companies, Cardenas says, and broadcasters "take risks by investing significant amounts of money into content production and marketing." Therefore, he says, they should have the right to determine its distribution.

  Duane Parde of the National Taxpayers Union, which is backing Scalise's bill, argues that the kind of power and influence that comes from such authority has created some unique situations over the years.

  He says a recent dispute between DirecTV and Sunbeam Television threatened to black out the Super Bowl for hundreds of thousands of consumers, and Cablevision customers in New York were blacked out from the first two games of the World Series in 2010.

  "The rules have not kept pace and still reflect the single-provider landscape that existed in 1992," Parde says. "In a true free market, cable, satellite and other operators could negotiate with multiple broadcasters for the same content, which in turn would encourage more reasonable prices and fewer blackouts."

  Compulsory copyright licenses and retransmission consent regulations put the government in the middle of what should be strictly private sector negotiations, Scalise says. "The government should not be in the business of picking winners and losers, and we need to implement common-sense reforms that lift the heavy hand of government from traditional distributors and ensure it's not extended to new technologies," he says.

  As for the money involved in the issue, particularly the donations he has received from industry players, Scalise says it has no impact whatsoever on what is essentially the "beginning of a work in progress." Additionally, he says none of his contributors were given special access to negotiations or drafts of the legislation.

  "I discuss policy with everyone," Scalise says. "I often meet with people who have given me no money over the years. It doesn't matter to me."

  While Scalise admits that fundraising has had some influence over policymaking in Washington, he adds that it "sure hasn't for me." Still, he says, raising money is important for politicians who want to be re-elected; he declined to comment directly on how legislation and committee assignments can increase those chances. "It's expensive to run campaigns, so you have to raise money," Scalise says. "Fundraising is a necessary part of being in politics."

  And if your industry has business before the Congress, donating appears to be an equally necessary part of being in business.

Jeremy Alford is a freelance journalist based in Baton Rouge. Contact him through his website: www.jeremyalford.com or on Twitter: @alfordwrites.

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