Broadcasters, Pay TV Firms Submit Comments for FCC Retrans Rules Review

Time Warner Cable, DirecTV and others file their reform ideas for the retransmission consent process and the agency’s role in disputes, while broadcasters say no government action is needed.

NEW YORK - With comments on the FCC’s review of its retransmission consent rules due Friday, various broadcasters, TV distributors and industry trade groups - from the National Association of Broadcasters to Time Warner Cable and Cablevision Systems - filed their views and suggestions on the state of retrans affairs.

As could be expected, broadcasters, which have seen rising revenue from retrans, generally argued that government intervention is not needed, while TV distributors called for major changes to create a level playing field.

The current rules, which have governed the FCC’s role in the carriage fee negotiations between broadcasters and cable and satellite TV companies since 1992, have been called outdated by critics. The FCC started a review after a series of high-profile stand-offs last year that led to broadcast signals going dark in some TV distributors’ homes, such as in the case of a showdown last fall between News Corp./Fox and cable operator Cablevision Systems.

The FCC has repeatedly said that it doesn’t have enough clearly defined power in the case of disputes, but earlier this year ended up issuing what is known as a notice of proposed rulemaking (NPRM). It said that industry players and others can submit their views on the issue until Friday.

The FCC’s NPRM reiterated that the agency "doesn’t have the authority to require broadcast television stations to provide their signals to pay television providers or to require binding arbitration." The FCC said it is looking for comments on possible reforms that would provide "more guidance” on the requirement that retrans negotiations happen in “good faith” and that would improve notice to consumers in advance of possible service disruptions caused by disputes.   

In its comments filed with the agency, the National Association of Broadcasters suggested that the FCC leave its current retrans rules unchanged, highlighting that major showdowns are rare. “The current market-based retransmission consent system is an effective, efficient and fair system that benefits consumers,” the group said. “Indeed, marketplace forces have resulted in thousands and thousands of successful retransmission consent agreements and very few impasses that have negatively impacted consumers’ ability to receive broadcast programming.”

The NAB added that there is “simply no evidence” that the retrans fees pay TV firms pay are “inefficient or uneconomic” or that broadcasters have disproportionate bargaining power. “To the contrary, the evidence suggests that the fees paid [by distributors] for broadcast signals are lower than those paid to cable networks with comparable ratings.”

Broadcast station groups, such as Gray Television and Granite Broadcasting, echoed the NAB comments. To an overwhelming extent, our experiences demonstrate that the market-based approach to retransmission consent continues to function well,” Granite said.

Distribution giants see things differently though.

Time Warner Cable said the market alone, “unfettered by regulations,” cannot handle the retrans issue. “Unfortunately, the retransmission consent process is decidedly not such a market-based regime. Rather, retransmission consent is an artificial regulatory construct, and it is heavily tilted in broadcasters’ favor,” the second-largest U.S. cable operator said in its filing.

TW Cable called on Congress to enact legislation that “deregulates the relationship between [pay TV distributors] and broadcast stations - by eliminating not only the artificial retransmission consent construct but also must-carry obligations, tier-placement” and “various other anachronistic and counterproductive regulatory measures.”

Citing mandatory tier-placement requirements, broadcasters have often demanded “automatic, favorable placement on the basic cable tier despite the fact that, in a more competitive marketplace, broadcasters would be required to compete on price and quality to gain access to desired tiers,” the company said. TW Cable also suggested that new rules amend the meaning of “good faith” to “bar network-owned stations from bundling retransmission consent with the carriage of affiliated cable networks.”

Satellite TV giant DirecTV echoed TW Cable’s call for reform, saying that the current retrans framework has “become increasingly dysfunctional, resulting in higher prices and service disruptions for consumers.” It added: “Reform of the retransmission consent regime is long overdue. It is part of an anachronistic system of rules that distort market forces by bestowing special benefits on broadcasters that cannot be justified under current conditions.”

DirecTV urged the FCC “to restore some balance by moderating broadcasters’ government-supported exclusive territorial rights and enhancing its requirements for good faith negotiation.”
Removing rules that allow one broadcast station to prevent other stations from competing for carriage in a given market is one solution proposed by the satellite TV firm.

Among various proposals to more clearly define “good faith” negotiations, DirecTV said broadcasters shouldn’t be allowed to refuse to honor a request for a stand-alone retransmission consent offer for the broadcast assets in question and shouldn’t be allowed to turn their signal off during the key ratings measurement periods known as “sweeps” or “prior to marquee events,” such as big sports events and the Oscars.

DirecTV also criticized NBCUniversal, now controlled by cable giant Comcast, which didn’t submit comments on the retrans issue. “[The company] has apparently reached an agreement, under which it would negotiate blanket retransmission consent agreements on behalf of its affiliates,” DirecTV said. “Granting such rights to a national network goes to the very heart of the retransmission consent regime and the commission’s good faith rules.”

Cablevision, which unsuccessfully tried to get the FCC involved in its Fox dispute last year, had already filed its submission on Thursday, and its proposal focused on three key rules that the company had previously outlined.

It urged the FCC to ensure that there is a transparency of fees by making them public, that no discrimination happens on the part of network owners between smaller and bigger cable and satellite TV providers and that the definition of "good faith" talks include the prohibition of "tying," or the bundling of cable networks into a broadcast carriage packaged, on the part of network owners. For example, News Corp./Fox included the National Geographic Channel in its negotiations for carriage of its Fox TV stations last fall.

“The days of secret pricing that, among other things, requires consumers to pay for additional cable channels before they can receive a broadcast channel should come to an end,” said Cablevision COO Tom Rutledge in a statement. “Broadcasters should not be able to keep the prices they charge hidden or to discriminate between distributors in a given market.  Our simple reforms would end these practices, and we urge the FCC to consider this consumer friendly approach.”

Meanwhile, the WGA West, whose members write for TV shows, among other things, sided with broadcasters. “The few instances of contentious negotiations between MVPDs and broadcast network affiliates do not warrant FCC action,” it said. “Rather, it appears that [pay TV operators] are using these instances to convince the FCC to weaken retransmission consent rules in a way that increases their market power in retransmission negotiations.”

Amid the competing views, one Wall Street observer is wondering whether retrans will remain a big growth area.
BTIG analyst Rich Greenfield in a blog post on Friday mentioned a new service called Bamboom, which gives consumers online access to broadcast TV channels, that led him to question the future ability of broadcasters to ensure the fast-growing retrans payments. “Is technology about to stop the retrans gravy train dead in its tracks?,” he asked.


Twitter: @georgszalai