Host and this week on the communicators we welcome back the president and ceo of the American Cable Association, matt polka. Mr. Polka, what is the American Cable Association . Guest thanks, peter. Nice to be here again. Nice to be here with you, lynn, as well. The American Cable Association is unique in the fact that we represent many smaller Cable Operators across the country, and everyone always asks me, are there still small Cable Operators left . In fact, there are nearly 900 of them in every corner you can imagine, rural areas, small towns. Many of them are providing Competitive Services even against some of the largest providers today. And whats great about these smaller companies, its a terrific story because theyre providing broadband, highspeed broadband in rural areas that desperately need Broadband Service. So these are the members we represent. Theyre smaller, theyre independent which means that theyre not affiliated with larger content companies or larger providers, and what we do is we provide their voice here in washington, d. C. Before the federal communications commission, before congress and any other agency here in washington, d. C. That deals with Telecommunications Issues that have an impact on these smaller companies. So we are their voice for the independent cable operator. Host so awbt about seven million households . Guest yes. Were in all 50 states, many of the territories as well, so its quite nice to see independent entrepreneurial pioneers that are still out there in small markets in rural areas doing exactly what the same pioneers did when this industry was founded some 50, 60 years ago. Host well, mr. Polka, you opened up by talking about broadband. Has that become more important guest oh, my goodness gracious, broadband is the service for not only our members, but when you look at the cable industry in general, the cable industry has done such a tremendous job of deploying broadband all over; urban areas, small market, rural areas where our members live and work. And it really has made the difference. And as we look ahead, we see that our members businesses and their future really is a broadband business when you look at the services that they provide. Today we provide voice, video, Internet Services as well. But broadband, more broadband is really the key, and in most of our members areas they say that the speed and the capacity and the demand for broadband in their markets is doubling every two years. So it becomes a really important issue for us as smaller providers that are providing that Broadband Service when we look at the washington perspective and how washington continues to regulate smaller business. And thats, essentially, what we are. Were smaller businesses looking for regulations that actually work and allow our members to flourish as opposed to be overly regulated which has a higher cost per subscriber. Host joining our conversation in the week is lynn stanton whos Senior Editor at telecommunications reports. Ms. Stanton . Thank you for having me. Matt, youve been critical the way the fcc is distributing universal Service Support funds for highcost, lowpopulation density areas. And what in particular about the way theyre handing out this money seems to you to be a problem . Guest well, its not just the fcc. Actually, when you go back historically, you can look at a number of programs that were designed to help deploy broadband in rural areas, programs which we actually support whether its programs through the Rural Utility Service as part of the u. S. Department of agriculture and other programs. The problem is not the goal to get broadband out into rural areas. The problem is how those programs are implemented. Each one of these programs, particularly starting with rus and looking back to the stimulus funds of 2009, were designed to be Technology Neutral meaning that anybody could take advantage of those programs. But when it came time to implementation, the rules that were used to implement those programs were essentially the traditional rules that the funding agencies have used for decades which favored one industry over another. So our members didnt have access to the funds. When we look now at what the fcc is doing with universal service, many of the same potential problems exist which is our members, as i said, have gone out with their own private equity, sweat equity to deploy broadband in rural areas, and now they face be a situation which is what we have seen before where taxpayer funds are being used to be given to other potential competitors to actually overbuild them. And we think that theres a problem with any implementation that allows for that kind of use of taxpayer funds to overbuild broadband, cable, phone systems that already exist through private capital. And thats what were concerned about with the fcc program as they renew and reform universal service. And, actually, the fcc has been very, very understanding of our concerns here as we look at the challenge process that theyre developing for these funds. But essentially, the problem was still the same, that the money was going to go is going to go to large price cap companies, some 10 billion over five years, all right . To be used in areas that are unserved and potentially underserved. Well, in of those underserved areas, quoteunquote, our members are providing broadband at much higher speeds than exist under what would be the current plan. So what we want to do is establish a process by where our members can challenge what is occurring through that process so that if they are there providing broadband, they can insure through a challenge process that, actually, that funding does not occur in those areas. So thats really the issue, is implementation to insure that money is used as intended to get broadband where it isnt, but not to be used to allow for overbuilds where our members are providing Broadband Service today. Dont your Members Service areas show up on the National Broadband map . They do, today do, although thats developing. As you know, when we go back to 2009 and before, we kind of did things backwards where the map is actually now the last piece of the puzzle before or we got money out and we established a process and we developed a map. Well, thats improving. And our members are very effectively working very hard with their state organizationings that are responsible for the National Broadband map as well as the fcc to get their information into that map. And were very pleased that as the fcc looks at the funding under the connect america fund that the National Broadband map will be central to their decisions many terms of where funding in terms of where funding might be appropriate. But to go the next step, and this is where we do appreciate what the fcc is done, is they will create a challenge process where even if there is information specifically isnt on that map, any company that could be harmed by way of this funding will be able to challenge that process by demonstrating they are providing broadband in an area where an application might be pending. Youve also in support of, i think, the erate there might be some changes, i think you said . Guest well, as far as erate goes, we are supportive of this. Obviously, the more we can get broadband out into schools, libraries, other places like that, thats very, very important. So we do support those programs. For our members its always, again, question of how were the funds distributed. So our issue there is can our members be an effective part of that process as opposed to sort of being on the outside of it . And we think that with this program and the ideas behind it that our members will be able to more greatly take advantage of that Program Going forward. Moving to a broadband reporting program . Guest yes. Thats exactly right. Definitely the idea of the program is something that we support and we want to see flourish in our markets. Its mostly up to the schools or the school districts, isnt it, who ends up getting the contracts to provide service . Is it because the money hasnt even been making it to the kinds of services that your members offer thats the problem in terms of your participation . Guest i think thats part of it. I think for our members its sometimes awareness, to know that there are multiple providers in a marketplace that actually might be able to provide something more cost effectively within the means that the schools have. Now, one of the issues that i think our members have faced is just the traditional bias towards particular buyers of service as opposed to a full technologyneutral class of companies. And what we want to insure is that our members have an equal shot at working with those schools to actually provide those services. Host mr. Polka, was the 2009 stimulus important to your members . Guest well, it was. And, again, as i pointed out, we sort of did things backwards went you go back and look at the stimulus. To have 7 billion of funding available through rus and through ntia in the Commerce Department was important, but again, our members were not able to access those funds specifically because of how the funds were implemented. And how the application process occurred. So consequently, we were more on the defensive side of the issue as opposed to the offensive side, meaning that we could actually get funds that we could use to deploy broadband. So on insuring that those funds were not used to provide an overbuild of existing Broadband Services compared to actually using those funds to deploy broadband. And unfortunately, i think that there was particularly now as congress is relooking at this issue and certainly as part of the fcc process theyre mindful of the fact that there was a good bit of waste and abuse in this program when you look at a number of programs across the country where there were cost overruns or programs that were not completed, money that was given back to the government. So unfortunately, i dont think the intent of the stimulus was met, and from our perspective we had a number of situations where our members did have to fight overbuilds. And unfortunately, because there was such a demand and such a movement to get this money out the door, the process, the challenge it wasnt very good. So our members consequently, despite the fact that they put evidence on the table to say we are providing Broadband Service in these areas where youre funding, no one listened. And thats unfortunate. Host on the other side of the equation, whats the future of video when it Video Services for your company . Guest thats a very good question when you look at many of the problems that are occurring in the marketplace today. As i said, you know, our members business is focused ahead on broadband, the services we provide are going to be broadband based, consumers are going to want to consume more video through broadband, through Online Services as we see now. In fact, we have many members that are actually engaging in allowing their customers to see more online viewing via their broadband plan. The issue of the video business and where that goes, i think youd probably have to ask the big dont companies about that content companies about that because theyre the ones that are driving the business today. From our members perspective, we believe that the video marketplace is broken as you can look at any number of disputes that are occurring today in the news whether its cbs time warner or any number of other programming disputes. N. , i just saw something the other day where amc was claiming that several smaller Cable Operators were going to be dropped from some of their services because these smaller Cable Operators, unnamed, agreeing to the prices amc demanded. And it all comes down to consolidation and bundling, it really does. And unfortunately, consumers are starting to move more towards online viewing because they say i dont have any choice as a cable or a satellite subscriber, and i want more choice. We, as cable and broadband providers, want to give consumers those choice, so were trying to work with them and give them the choices that they want. But its a huge issue, one, thats not resolved, its only getting worse and, frankly, you know, i can tie this all the way back to 1992 when Congress First implemented the retransmission consent rules, and i can draw a line from that through the beginning of consolidation through the network and programming business to now we have these four Major Content Companies across the country tie in bundle services, they pay exorbitant amounts for sports rights, for the right to provide sports that every consumer has to pay for whether they watch it or not. Our members tell us that only about 30 of their customers are real sports fans, that are real diehards that would pay for it. The other 70 could take it or leave it. In fact, they tell us why do i have to take all of this content . So it is a problem thats continuing. Many have predicted the demise of the Video Industry the way it is today with wholesale programmers, content Companies Selling to cable and satellite operators. In my view, when that happens, there will only be one party to blame, and thats those that own the content, because theyre the ones that are creating the massive bundle that we have to take today in our competitive environments and that consumers are beginning to really, really revolt against not only because of price increases, but also because of lack of choice. Host so what about senator mccains a la carte bill . How does that sit with your members . Guest senator mccain has been certainly a champion of someone whos wanted to give more choice to consumer. We have supported more choice going back to a rulemaking at the fcc in 2008 that looked at the wholesale programming model. And, basically, what we said which we said in response to senator mccains bill is, number one, we appreciate the dialogue. Were glad that he was bold enough to say, look, i think its time that we as a Congress Look at this. And interestingly enough, and we thank him, too, senator blumenthal from connecticut who cosponsored that bill. I think thats really important for the congress to have a dialogue about those issues right now. But we, we look at that bill and say even though you would like us to provide choice, which we would like to provide, we cant because the companies that own the content refuse to give us the ability to provide that choice to consumers. So even if it were mandated, even if its, as in senator mccains bill, an incentive to provide services on an a la carte basis, we cant because we dont control the rights. What we have said and what our members have said that they could do today if, again with, given the ability to do so, is to provide services on more of a tiered level as it occurs, i believe n canada and as has happened in some other cases where you take certain genres of programming and allow people to buy the genres of programming that they would like. We supported that back in 2008 during the rulemaking that chairman martin instituted at the time and have said if our members had more flexibility to provide services more akin to what their customers are telling them that they would like, then we could probably find some middle ground. But the fact of the matter is, the content companies whether its comcast nbcu, whether its viacom, abc, espn, they will not let us carry their programming other than in, essentially, the expanded basic tier of service. And consequently, everything is bundled into one large package that consumers have to take and pay for whether they want it or not. And thats really their choice, take it or not. And as we see Going Forward, a choice that consumers are making, starting to make a lot more often is i wont take it. Ill look for some overthetop solution. Maybe ill just get broadband from my provider, and ill get the Video Services that i want online by my be choice, not by someone elses dictated choice. And i think were going to see more of that which underscores our members important broadband future and the need to keep congress, the fcc continuing to provide a light touch of regulation on those services so that we can provide the level of service thats required in those smaller markets in rural areas. To get that flexibility, you just said a light touch regulation. So would you or would you not be in favor of congressional action to force programmers to sell their channels on, you know, not bundling in one channel with another and making that a contractual mandate on you to buy guest well, we certainly would like that flexibility. Im not sure that it would ever reach that point where there actually might be language to that effect. But the fact is that consumers are already moving on their own. So we as broadband providers want to help to give consumers that choice that they want. We have many of our members today taffe considered that have considered instituting and building into their systems video on demand. Very expensive, can be for a smaller operator, lots of equipment, new boxes, etc. Where others are saying why would i do that nowadays . Now when i have an opportunity to give consumers more of what they want through my broadband plan where through their broadband plan they can give consumers the ability to view netflix, hulu, amazon, prime, etc. And i think were going to see more of that as consumers look on their own again, consumers and the marketplace in that regard or, technologying are so far beyond technology are so far beyond kind of where we are today from a policy perspective that were trying to meet the demand of our customers while at the same time we try to work for Reasonable Solutions here in washington where those are available. And the last congress i dont think it was reintroduced this time, there