Feuding media company execs at statehouse

The CEOs of Mediacom and Sinclair were in Des Moines, IA today to appear before the Iowa Legislature’s Oversight Committee.  It was high drama.  The top lawyers for both sides were there, too.

I’m guessing you know the score here as to the dispute between the two companies, so I’ll march ahead and describe the nearly two-hour hearing.

Linda Carter, representing the Iowa NAACP, was invited by the committee chairman to speak first.  She said 10 percent of Mediacom’s customers opt for the "most affordable" (I would call it cheapest) plan, and Carter said those Mediacom customers would not be able to swtich to Direct TV or the Dish Network because they’d need to pass a credit check and sign an expensive, long-term contract for the service.

Next, Senator Tom Courtney invited the four execs from the two companies to sit in the four chairs at the end of the committee table.  They agreed to sit next to one another, and began shifting into place.  At this point, Courtney advised the men about the mic system on the table (stand-up mics with a speaker — folks have to press a button to activate the mic).  There is no sound system, though, into which the media can tap to record the proceedings, so there were about seven microphones set up at that end of the table.

"Pay no attention to the others," Courtney told the execs, referring to the microphones from the media outlets there to cover the meeting. "They’re just the news media."

Rocco Commisso, chairman and CEO of Mediacom, was invited to speak first.  He began by telling legislators about his personal biography (he’s an immigrant from Italy — a rags-to-riches story).  He concluded by saying Mediacom was the 8th largest cable system in the country, serving customers is 23 states.

Commisso then handed the floor to Ed Pardini, divisional vice president for Mediacom.  He recited the stats about Mediacom:  number of residences reached, amount of cable stretched in Iowa, how much they pay workers (at least 80 percent of the minimum wage), etc.  He declared Iowa to be the "crown jewel" of Mediacom (which Commisso later repeated).  Pardini said Sinclair’s "refusal" detracts from the quality of life in Iowa, stifles economic development by denying advertisers greater reach.  Pardini repeated the stats Linda Carter has recited (the 10 percent of customers subscribing at $16.95 for basic cable service).  He, too, argued most could not switch to Direct TV or Dish Network because of contract terms.

Next up, Sinclair Broadcast Group president and CEO David Smith but the battery in my recorder died, so I had to run downstairs to the statehouse press room for a replacement batter and missed his opening remarks to the committee.  I came back just in time for Smith to hand off to Barry Faber, general counsel for Sinclair for the past 10 years. 

"Although this is an unfortunate situation, it is a situation that is completely legal under the retransmission consent laws," Faber said.  Faber then told a story comparing the dispute to Mediacom shopping for a sweater and not buying it because of the price (I used the quote in my Radio Iowa story)   "You would not characterize that, I don’t believe, as the store having refused to sell to that customer.  It’s simply the situation where two parties didn’t agree on price and no sale took place," Faber said.

Faber claimed the FCC had already determined Sinclair had acted in good faith.  (Commisso later counter-claimed the FCC had not taken a vote on the matter.)  Faber accused Mediacom of using the FCC and federal intervention as a ‘red herring" to "inflame public opinion."  Faber said congress was not interested in passing new regulations to govern the outcome of the dispute.

Commisso angrily rebutted, beginning with the sweater story.  Commisso said Mediacom is prohibited by law from importing the signal of another CBS station into the Cedar Rapids market or another FOX station into Des Moines to provide Mediacom customers with FOX or CBS programming, and Commisso equated that to a monopoly.  "So that person who really wants to buy that sweater cannot buy that sweater," Commisso said.

"With the respecf to the lawsuit that he claims…we have lost, the only thing we filed in Iowa nad lost was an injunction relief…to get injunction relief, it’s a higher standard but the case is there.  There merits will be decided unless he’s trying to take away now even my rights as a US citizen and representing all my employees in this country to proceed with the lawsuit," Commisso said.

Faber replied:  "Our stations are available on Direct TV, Dish Network and over the air for free." (He referenced Linda Carter’s comments and suggested "if cost is of concern, we are available over the air to the vast, vast majority of people in Des Moines and Cedar Rapids."  It was at this point Faber said Sinclair was asking Mediacom for a payment equal to 50-cents-per-customer — a fee he said was significantly lower than the fees charged by cable channels like ESPN or the Disney Channel.  He argued the signals of the two Iowa stations Sinclair owns are must more valuable because people watch their stations more often than the other offerings on cable.

Faber concluded by citing the judge’s opinion in that injunction ruling, and the judge "concluded that Mediacom did not have a likelihood of success" on its claims in courts according to Faber.

Courtney jumped in:  "I apologize to everyone in the room.  I really didn’t ask you here to have a verbal fist-fight."  Courtney asked Sinclair’s attorney why they wouldn’t agree to binding arbitration.  Faber said the two companies couldn’t even agree to which items would be subject to arbitration, so it’s highly unlikely because of the status of talks.  "Just from a fundamental, philosophical standpoint, arbirtration is not something private parties would enter into to determine the basic parameters of a deal," Faber said, admitting he submitted to arbitration over his own employment argreement.  But he described arbitration in that case as an alternative dispute mechanism to going to court "as opposed to someone else deciding for you how you’re going to run your business."   He again mentioned Direct TV and the Dish Network in some context related to his story about a homeowner who wouldn’t submit to binding arbitration when coming up with the sale price for their home.

Next, other legislators started asking questions.  Senator Mary Lundby, a Republican from Marion, was first up with a statement:  "Couple of things.  You probably spent some time on a 15 minute commercial.  My constituents are decidedly disgusted with what’s going on.  My constituents are in the Cedar Rapids, Linn County area and I’ve heard from a lot of them and a commercial might have helped me explain to them what’s going on.

…"Mr. Faber, you’ve obviously never been in Carroll, Iowa.  My mother and brother are Mediacom customers in Carroll.  When I was a child we used to have to have a special antenna that was 300 feet high in order to bring in the Des Moines stations.  I’ve paid up my mother’s cable for a year for her Christmas gift and she can’t get her three favorite programs.  Rabbit ears did her no good. She’s going blind and Mediacom is her life-link for what she enjoys most days so I’m disgusted about that as well," Lundy began.

Lundby told the two companies to "pick an arbitrator and get this decided….I hope you’ll think about your customers and not just your bottom line."  Lundby, by the way, was sitting right next to Sinclair CEO David Smith when she was saying this.  "Fox is doing well.  Your company is doing well and I hope you’ll start thinking about your customers," she concluded.

Faber’s return included a reply to Mediacom’s offer to take the deal TimeWarner cable systems had negotaited with Sinclair stations in other states.  "Time Warner is a company that is 100 times bigger than Mediacom and 10 times the foot print that does with us, that we have a huge business relationship with beyond cable that spends millions of dollars on our television stations in advertising.  It is a different situation as is every negotiation," Faber said.  "…It doesn’t work that way in the business world." 

Then Faber addressed Lundby’s comments about her mother.  "We’re sympathetic.  We provide this programming that you’re talking about.  We put together the news.  We pay the networks for the network programming…and we’re very interested in consumers…Just like Mediacom is interested in consumers because it’s the way they make money by having subscribers, it’s the way we make money by having viewers so to suggest that we’re not interested in the viewing public — it’s just not true," he said.  "….We’re not asking for outrageous fees.  We’re asking for less than they pay for numerous channels that don’t have ratings that come even close to ours."

"Just one other comment and I realize this doesn’t apply everywhere but right now in Cedar Rapids…there’s not only Direct TV and EchoStar — the Dish Network, there’s also a company called McLeod USA which we were able to reach agreement with, which pays us, which seems to be able to charge, last time I checked, substantially less than Mediacom for the same service," Faber said.

Lundby:  "Once again, have you been down to Carroll?"

Faber:  "Not personally, no."

Faber continued by explaining that their "over the air" signal is their obligation with the FCC, and he said cable was a private, for-profit business that is "taking our asset."  Faber said all Sinclair wants is to be paid.  Later, it was revealed the 2002 contract between Sinclair and Mediacom regarding the two Iowa stations had Mediacom paying nothing — zero, zilch — to retransmit the signals. 

Next, Representative Wayne Ford, a Democrat from Des Moines, said the dispute has put him in the unique position of watching t.v. in a different room from his wife.

During Faber’s next response, an angry Commisso turned his microphone on — but his attorney reached over and turned it off.

Several legislators, including Representative Kurt Swaim, an attorney, tried to get a handle on what Sinclair considers their "public interest" obligations.

One lawmaker, Representative Ralph Watts, a Republican from Adel, pointed out the Iowa Legislature has no jurisdiction to settle this dispute.  "The State of Iowa really out to stay out of it," Watts said.  "Shame on you (Sinclair and Mediacom execs) for wanting to come here and shame on us for accepting the offer."

Senator Courtney later told Faber: "Your answer sounds like ‘Let them eat cake.’  You really don’t care about people."  Later, Courtney said in an interview that Faber appeared "arrogant" during the proceedings.

Representative Debra Barry asked both parties if the end to this dispute is in sight.  Neither said it was.

As a postlude, the committee had invited a Drake University journalism professor who wrote an op ed piece that was published in the DM Register to speak.  "I don’t really know why I’m here," Janet Keefer told the committee, since she said she had no real expertise on retransmission contracts — which are at the heart of the dispute.  But she did add comic lines to the ending of the hearing. 

Keefer said those who had read her op/ed might conclude she was siding with Mediacom, but she said as a Mediacom customer who had been put on hold for 45 minutes and forced to listen to the most awful music, she might suggest the cable company might offer their expertise to the interrogration of terrorism suspects in Gitmo.  (Mediacom CEO Commisso was sitting to Keefer’s right and did chuckle at this.)

She closed by saying the whole thing reminded her of a movie she and her husband saw last year, one which depicted Hitler and the others who lived with him in "the bunker" at the very end of the Third Reich.  "There are no characters in this drama that anyone feels strongly affectionate towards," Keefer said of the Mediacom/Sinclair battle, as people in the room laughed.