An impasse in negotiations between communications provider GCI and KTUU-TV has both sides saying Southeast Alaska will lose Channel 2 News coverage when a deadline passes at midnight Saturday.
GCI and KTUU-TV had reached an agreement in principle on economic terms Nov. 22 extending a deadline for a larger deal to Friday. The firms’ representatives, however, both say new and unacceptable conditions have emerged in subsequent talks between their lawyers to hammer out the details.
In a statement from KTUU-TV, Marketing Director Brad Hillwig says the point preventing Channel 2 News broadcasts from returning to NBC affiliates KATH-TV in Juneau and KSCT-TV in Sitka involves future contracts with GCI governing KTUU-TV’s joint ventures.
“The key provision that derailed the agreement was language GCI sought that would obligate KTUU-TV to accept any agreement the cable/telecom operator had in place for any Alaska broadcaster KTUU-TV might seek to joint venture with in the future, either through shared service or purchase agreements,” Hillwig wrote.
In practical terms, Hillwig says GCI’s terms mean that if KTUU-TV were to purchase a TV station in Alaska which had previously negotiated terms of carriage with GCI -- terms often favorable to GCI -- the station would be governed by those terms, without giving KTUU-TV a chance to renegotiate them.
While Hillwig isn’t aware of any current plans for KTUU-TV to purchase a station or enter a joint venture, he says the language constitutes a threat to the station’s future growth.
“Companies have to -- particularly in competitive environments -- maintain such options,” Hillwig said. “Having the possibility of expanding is something that (GCI) would be able to constrain with that agreement in place.”
GCI spokesperson David Morris dismisses that allegation, saying it didn’t arise until after the agreement in principle was signed on the day before Thanksgiving. According to Morris, other stations in Alaska have marginal market shares compared to KTUU-TV, and GCI shouldn’t face the prospect of having to pay more for their signals in the event the larger station bought them.
“It's curious that in the event they gain control of another broadcast affiliate -- which they have dismissed time and again over the last eight months -- that it would automatically be worth the same as KTUU,” Morris said.
Morris says GCI also takes issue with another attorney’s demand raised the day before Thanksgiving, which he characterizes as a requirement by KTUU-TV’s parent company, Schurz Communications Inc., that would double GCI’s costs under the Nov. 22 agreement in principle.
“You don't get to have an agreement in principle and then double it -- that's not an agreement in principle,” Morris said. “That's a significant change to any agreement that they have agreed to -- for them to say, to ask that they throw out what they had agreed to the day before Thanksgiving is disingenuous.”
KTUU-TV officials say they’re unaware of any such demands made since the agreement in principle, and that as far as the station’s concerned the economics of that agreement remain unchanged.
Despite the change in conditions GCI says Schurz has demanded, Morris says the station has received favorable terms in its previous carriage agreement, which saw KTUU-TV’s signal distributed for free.
“I will say this: there is nothing keeping KTUU from building out a network that can distribute its signal all across Alaska,” Morris said. “There is nothing keeping KTUU from partnering with another carrier to do that -- they are simply wanting a free ride.”
At KTUU-TV, however, officials say that claim is baseless, noting in statements that GCI has received numerous government subsidies amounting to 19 percent of its annual revenues for providing coverage to rural Alaska.
“The area it is subsidized to serve with this infrastructure it cites are some of the same areas in which it has blacked out KTUU-TV and whose residents report they are reluctant to cancel GCI cable out of fear their GCI telephone and internet access rates will skyrocket,” officials wrote.
Hillwig says a byproduct of GCI’s claim -- a full-page ad campaign in the Anchorage Daily News, featuring calls by GCI for KTUU-TV to “Honor the Deal” -- has been accompanied by a recent shift in tone from the company.
“We’ve been surprised by the messages they’ve been putting out, particularly through aggressive advertising,” Hillwig said. “It seems clear that there was a decision that there would be no agreement.”
From Morris’s standpoint, any change in tone at GCI comes back to the increased costs of carriage for KTUU-TV, which he says are unsustainable for his company.
“It's not a cost that we can absorb,” Morris said. “So for Schurz to say GCI walked away from the table is utter nonsense.”
Morris downplays the recent launch of a revamped newscast at GCI’s newly purchased Anchorage CBS affiliate KTVA-TV as a factor in recent talks, noting that any shift in ratings will occur over time given KTUU-TV’s significant entrenchment in the local market.
“I don't think that you're going to see significant change in the rankings for some time -- it's simply you don't lose brand equity overnight,” Morris said.
Hillwig says that unless talks make unexpected progress before Friday’s midnight deadline, the consequences could extend beyond KTUU-TV’s future in Juneau and Sitka to 22 rural Alaska communities where carriage agreements have also been in play.
“The blackout in rural Alaska will essentially continue indefinitely,” Hillwig said. “Throughout this process, there have been a number of sticking points that have come forth.”
When asked about GCI’s outlook for talks before the deadline and the likelihood of averting a blackout, Morris was succinct Friday afternoon.
“I'd say that the outlook is dismal at this point,” Morris said.