Below is a letter sent by KTUU-TV president and general manager Andy MacLeod to members of Alaska's rural caucus on November 9, 2013.
Dear Rural Alaska Caucus Member:
I wanted to let you know that GCI pulled KTUU-TV from its rural cable systems and over 7,000 subscribers1 at midnight on November 8th. While the parties were only pennies apart on a multi-year deal, GCI demanded non-economic concessions that would have restrained our ability to operate as a media company and an independent news source for Alaska.
The midnight deadline was of GCI’s choosing, and as late as 11:49 p.m. we repeated our offer of free carriage through 2014 for the rural areas. GCI rejected it as it has repeatedly done since tying rural carriage to negotiations for a longer term deal for Anchorage.
GCI recently completed its purchase of three television stations – CBS affiliate KTVA in Anchorage and NBC affiliates KATH in Juneau and KSCT in Sitka – and the restraints it sought are clearly designed to give advantage to its TV stations at the expense of KTUU-TV.
The GCI demands to which we would not agree include:
1. GCI insists that KTUU allow it to carry another NBC signal on its rural systems (likely, its own NBC station from Juneau). KTUU has provided coverage to the rural areas since 1977 and on GCI since the mid-1990s. While GCI is free to negotiate with program providers, KTUU will not bow out of the way so GCI can feather its own nest and eliminate an independent source of Alaska news that has served rural residents for 35 years.
2. GCI insists that KTUU grant it the right to place the station on a "tier". The FCC has required, for 20 years, that broadcasters be placed on the so-called "basic tier", traditionally the lowest cost option on a cable system. Despite KTUU’s offer to renegotiate “tier” positioning if the law eventually changes, GCI demanded KTUU-TV blindly consent to any such change now. This is an anti-consumer move on GCI's part as it would require rural Alaskans to pay more to receive KTUU-TV, the highest viewed channel on GCI's system.
3. KTUU asked to be carried in High Definition (HD) to rural Alaska if, and only if, GCI carries another broadcaster in HD. GCI refused. Since GCI/Denali Media is advertising that it will carry its newly acquired CBS station in HD, this appears to be another attempt to use the pay cable system to disadvantage KTUU, GCI’s main television competitor. The subscribers paying GCI have made KTUU the top rated channel on GCI's systems. It is anti-consumer to deny customers their favorite channel in HD to favor a station owned by GCI.
4. We also sought the right to add a second signal onto our primary signal, which is called D2 in our industry. We offered GCI this additional programming for free, unless the station was another major network (Fox, ABC or CBS). Of course, GCI would have the right to reject such compensation if it chose not to carry the D2 signal. As such, it was a balanced offer – we could seek compensation, and GCI could refuse. GCI demanded any D2 be locked in at zero compensation.
GCI’s demands, in addition to being anti-consumer and anti-competitive, appear to be unparalleled. We cannot find an example anywhere where a station has been pulled when the cable operator had the right to carry that station for another year.
GCI is suggesting that KTUU-TV is demanding “unreasonable” payments for its programming. At GCI's request, KTUU has been attempting to negotiate a long-term arrangement in which it would be fairly paid for the content it produces starting in 2015. (For nearly 20 years, GCI has been collecting fees from customers for this content, but paying local broadcasters nothing). By GCI's own admission, our fee request for 2015 is less than the average NBC affiliate is being paid in 2013. Our request is less than 5-cents a day, 1/5 the rate GCI pays for many channels with much smaller viewership.
GCI chastised KTUU-TV for stating the dispute between the cable operator and KTUU-TV “… is about choice in news…” and argued instead it is about money2. That is patently not true.
Although the parties were pennies apart on economics, in its last offer to KTUU, GCI did not even address rates. Instead, GCI insisted KTUU accept the carriage terms we described above. These are thin veils on GCI's strategy to increase its monopoly position in rural distribution by favoring television content it now owns. By attempting to squeeze out competition and limit consumer choice in news and information, GCI is engaging in precisely the activities it promised it would not undertake when seeking FCC approval of its television purchases.
KTUU’s main objective has been to avoid putting Alaskans in the middle of a complex business dispute and at 11:49pm on November 8th, we reiterated our offer to allow carriage at no charge through 2014. GCI refused and darkened the signal.
We wanted you to know why KTUU-TV, the station more Alaskans watch than any other on GCI or over the air, is being blacked out in rural Alaska on cable, an area with some of the most limited choices in video and news in this country and where such information is often a matter of health and safety.
KTUU-TV President and General Manager
1Affected communities are: Barrow, Bethel, Cordova, Kodiak, Kotzebue, Nome, North Slope oil fields, Valdez, Adak, Akutan, Anaktuvuk Pass, Whittier, Galena, Unalaska, King Salmon, Kaktovik, McGrath, Nikolski, those served by the Chugach McKinley system, Skagway, and Tanana.
2 Nov. 1 letter to state legislators, Greg Chapados, Executive Vice President and COO GCI.