Another Alternative for Local TV

One of the factors that is jacking up the price of cable TV is the retransmission fees paid to local networks. Cable companies pay hefty fees to local ABC, CBS, FOX, and NBC affiliates in order to carry the stations on a cable system. A decade ago this right was mostly granted for free, but cable companies now typically pay $12 to $15 per month per customer to carry the local network stations.

Locast has found an interesting way to put local networks on the Internet without paying the local retransmission fees. They have launched their service in New York, Philadelphia, Boston, Washington DC, Baltimore, Chicago, Houston, Dallas, Sioux Falls, Denver, Rapid City, Los Angeles, and San Francisco.

Locast is taking advantage of a loophole in the law that allows ‘broadcast translators’ to receive and transmit a local broadcast TV signal without a copyright license. In the US, a broadcast translator was traditionally a relay station that would receive TV signals from an antenna and then retransmit the signal to an area that couldn’t receive the signal. There are always places in and around cities that are in radio ‘holes’ that can’t get a signal, similar to dead areas for cellular coverage. Further, it’s common for folks living in areas with a lot of high rises to not be able to receive local TV through the air without access to rooftop antennas.

A law passed by Congress in 1976, 17 U.S.C. 111(a)(5), allows for a non-profit organization to make a secondary transmission of a local broadcast signal as long as the non-profit doesn’t receive any ‘direct or indirect commercial advantage’ from the process. Non-profits are allowed to charge a fee that allows them to recover actual and reasonable costs, but no more.

Locast is a non-profit that is operated by the Sports Fans Coalition NY, another non-profit that has been fighting to make sure that New York City residents can see local sports over the air. For example, the organization has fought to modify the blackout rules enforced by many major league sports.

In New York City the organization puts 14 local stations on the Internet that includes the major networks. Customers of the service receive the channels along with a traditional channel line-up for the local channels. Locast claims the service is of huge benefit in the city since there are many households who cannot receive signals over-the-air with access to roof-top antennas.

Locast also paints itself as being of benefit to local stations. They geofence each city and only make the internet feeds available to those that can verify they live in the specific metropolitan area. Locast says that they are reaching cord cutters and are providing benefit to local stations because they provide feedback of what people are watching. This gives stations verifiable ‘eyeballs’ that can be counted when selling advertising. Stations are otherwise not seeing any financial benefit from cord cutters.

Locast solicits donations – with the base suggested amount of $5 per month. Viewers are not required to donate, but reviews say that those that don’t donate are interrupted regularly asking for a donation.

It’s an interesting model. A few years ago, Aereo tried to do something similar and was selling low-cost access to local stations through a technology that beamed the signal directly to each viewer. The broadcasters hounded Aereo in court until they finally forced them out of business.

The interesting difference here is the non-profit loophole. It’s a little surprising that Locast hasn’t yet been sued, having started this business in early 2018. They admit on their website that they expect at some point to get sued. But perhaps they won’t get sued if the local stations see the benefit – Locast claims that some stations in Philadelphia are actively working with them since they bring verifiable customers and tracking of views.

Finally a la carte TV?

Charter just sent me an advertisement that got my attention. They are offering a TV package for $21.99 per month that includes my local network affiliates plus ten other channels that I get to select. This is the first TV service I’ve seen that provides a la carte choice. The statistics from Nielsen show that the average family watches around a dozen channels and this service could give people exactly that.

The local networks included are ABC, CBS. FOX, NBC and PBS. The offer I got then allows me to pick 10 out of 65 of the most popular cable networks. This includes a wide range of options like AMC, Bravo, CNN, the Disney Channel, the Food Network, HGTV, MTV, MSNBC, TBS, and USA. I was surprised to see the offer includes the option to pick the pricier sports networks like ESPN, ESPN2 and FS1. This price includes access to the apps of your selected channels. Charter also offers around 6,000 on-demand titles, although it’s hard to know how worthwhile this might be without signing up for the package.

The offer made it sound like this was an online OTT offering, but when I went to the web site I found that I can choose between delivery through a Charter settop box or delivery through a Charter broadband connection.

My first reaction to the offer is ask how Charter is able to offer this. There are specific FCC rules that define cable tiers and I’m not sure how Charter gets away with this as a traditional cable product. This doesn’t fit the FCC definition of a basic tier and certainly is not even close to an expanded basic tier. We’ve been told for years that cable companies cannot offer a la carte pricing for channels, and yet Charter is doing just that. I’m guessing that Charter does not consider this to be a true OTT offering since it’s only available to Charter broadband customers and never touches the open web.

I also wonder about the $21.99 price. I have a hard time thinking that Charter talked the local network affiliates across their huge footprint to agree to put their content onto the web, and so Charter is going to charge local franchise fees on the product with or without having the settop box. I also wonder if Charter will charge ancillary fees like a local broadcast fee or other bogus fees they charge to their normal cable customers. Anybody getting this through a settop box is clearly going to pay for the box. A customer buying this through a settop box might end up paying $35 to $40.

I also wonder if I can watch this programming when I’m traveling, which is a major consideration for me. If they can make that work then I again wonder how Charter can ship local affiliate programming over the web.

Regardless of how they are getting past all of the regulatory rules this has the potential to be a great product. Assuming it doesn’t really cost too much more than $21.99 it blows away the base prices for other OTT options like Sling TV, Playstation Vue and DirecTV Now. Those packages have an affordable basic option, but it always costs more when you add enough tiers to get the dozen channels you really want. As a traditional cable service it’s massively better than Charter’s basic offering for around the same price that doesn’t include any popular network. Any Charter basic customer ought to upgrade to this package. Interestingly Charter is charging a $20 install fee whether this is done using a cable box or over broadband, which further confirms that this is probably not considered as an OTT product.

Surveys have always shown a huge public desire for a la carte programming. People don’t like paying for the hundred channels they don’t watch. I have to think that this is going to put the pressure on the other cable companies to offer something similar.

This product seems to be aimed at cannibalizing Charter’s other TV offerings. This offer, perhaps more than anything else I’ve seen from a cable company shows that they recognize that a huge number of their customers are thinking of bailing on traditional cable TV. This offer offers a lower price option for customers to not completely cut the cord. Unless they pad this with ancillary fees it’s hard to see much margin in this package.

This package makes a lot of sense in places like the research triangle of North Carolina where Charter is competing against Google Fiber and AT&T fiber. It’s harder to understand why they are offering a low-margin cable option where they are competing only against DSL. Perhaps the reasoning is as simple as wanting to keep a few dollars margin rather than losing customers as cord cutters.

I thought about buying this, but I don’t really trust Charter and wonder what the real price tag is – it’s almost certainly not $21.99. I would also be unhappy if this only worked when I was at home on my Charter broadband connection. I am an unabashed Maryland Terrapins fan and I also wouldn’t buy this package since it doesn’t include the Big10 Network. Perhaps my own pickiness about channels shows the real challenge of offering a la carte programming. We each have our list of favorite channels and are likely to reject any OTT offer that excludes a network we insist on buying.