Failed negotiations between Alaska cable provider GCI and Anchorage TV station KTUU Channel 2 led to the expiration of a rural broadcasting arrangement between the two companies Saturday.
Both sides sought to reconcile their differences late into the night Friday. Without reaching a deal by the midnight deadline, the broadcast of Channel 2, Alaska's main NBC affiliate and producer of the state's most-watched newscasts, ended for about 7,000 rural GCI cable subscribers.
According to KTUU, the change affects viewers in about 20 communities, including Barrow, Bethel, Cordova, Kodiak, Kotzebue, Valdez and Whittier. If people in those places want to watch KTUU or other NBC programming, they can still switch channels to the Alaska Rural Communications Service or watch online, GCI said. GCI replaced KTUU's signal with shows from other networks on its cable systems in those communities.
Spokesmen for the two companies expressed frustrations Saturday about not reaching an agreement. GCI said KTUU, owned by Schurz Communications Inc., wanted to charge too much money for its programming; KTUU said it wasn't about the money.
The dropout in service comes on the heels of a decision by the Federal Communications Commission to approve GCI subsidiary Denali Media's purchase of another Anchorage TV station, CBS affiliate KTVA Channel 11, with clear ambitions to compete directly with KTUU. GCI has spent about $20 million on its new state-of-the-art television operation, the company said, and is heavily advertising its early-December launch.
(The new KTVA studios and offices are located in the Anchorage Daily News building and are being leased from the newspaper.)
Before the KTVA sale was approved, KTUU and other broadcasters had petitioned the FCC complaining that GCI might make just such a move to drop their broadcasts. The petition ultimately just delayed KTVA's purchase, and the FCC denied the claims. KTUU spokesman Brad Hillwig, the station's marketing director, said that with GCI's own news station about to battle KTUU for news viewers, the cable company was being "anti-competitive" and "anti-consumer."
"News and information is vital in rural Alaska, and we believe very strongly in that," Hillwig said. "So I think if there was disappointment it was because of the restriction of choice and changes in our ability to serve people in that distribution system."
"When you step back and see the chess pieces on the board, you see that GCI is launching its news product on KTVA and restricting KTUU," he said. "The fact these two things are happening simultaneously is troubling."
GCI sees it differently. Even though the first moves to purchase KTVA came before negotiations with KTUU began, the fact that GCI was getting into the Alaska news scene did not play a role in the negotiations, at least from GCI's perspective, spokesman David Morris said.
"Even absent of that, this issue still would've come up with the rural communities because that is part of an agreement that predates the KTVA acquisition by years," Morris said. "What is taking place is that Channel 2 is asking for significant increase in how they are compensated for their signal to the point it would seriously affect our ability to provide their service to cable television customers."
KTUU had offered to let GCI carry the station's signal free through 2014. In earlier rounds of negotiation, GCI had asked for a 12-year deal, which KTUU called unfair and unprecedented. The offer on the table by Friday, when the negotiations ended, would have been through 2017. Although GCI provided other nonfinancial compensation to KTUU in the form of "in-kind" services, broadcasting KTUU's signal free was the deal they'd already had for years, Morris said.
But after 2014, KTUU wanted $2.5 million per year plus the other services, things like free satellite uplinks and cellular phone and Internet service, and the station wanted an additional channel or channels to broadcast on in exchange for its local and national content, Morris said.
"GCI just can't afford to have that type of cost increase," Morris said. "You can't control costs if you give into those type of demands."
KTUU's Hillwig disagreed, saying the final sticking points were not related to money. Across the country, Hillwig said, stations are starting to charge cable providers for content, and the two sides in the GCI-KTUU discussion had actually gotten close to making a financial agreement, he said.
"They were within pennies of each other," Hillwig said.
Hillwig said it really came down to four things:
- Giving KTUU exclusive rights to be the only NBC channel on GCI's cable system in those rural communities.
- Keeping the station on basic cable even if federal rules no longer required it in the future.
- Agreeing to carry a high-definition signal of KTUU. (The new KTVA broadcasts set for December will be HD, GCI said, and KTUU is scheduled to switch to HD when construction of the station's new headquarters in Midtown is complete.)
- Allowing KTUU to broadcast its content on an additional channel.
"Ideally, these deals are mutually beneficial," Hillwig said. "In a perfect world, we offer content to GCI's subscribers and get a fair market deal to provide that. In this case we weren't able to achieve that."
GCI's Morris cast the blame back on KTUU.
"There's been some movement from each side, but honestly it's like moving air from one side of the balloon to the other," he said. "To work three months and have to see this type of thing occur to customers is not what GCI wanted at all. I believe that we have been very rational and very forthcoming in our responses and very earnest in trying to find a fair market value for what is taking place. And that has not occurred from the other side."