Broadcasters Cite Pay-TV Consolidation As Reason to Keep FCC Exclusivity Rule

The NAB argues that AT&T, Comcast and others already have great market power.
Associated Press

Broadcasters are fighting hard to keep a rule that prevents cable and satellite companies from importing out-of-market TV signals in the face of retransmission disputes. Billions of dollars are on the line.

On August 12, FCC chairman Tom Wheeler surprised many in the television industry by proposing an end to so-called exclusivity rules, which allows a local TV broadcast station to essentially have a monopoly on their programming in a given geographic region.

"In this item, the Commission takes its thumb off the scales and leaves the scope of such exclusivity to be decided by the parties, as we did in the Sports Blackout Order last year," wrote Wheeler in a blog post. "In so doing, the Commission would take 50-year old rules off our books that have been rendered unnecessary by today’s marketplace.

Broadcasters have been expected to reap nearly $10 billion in retransmission fees by 2020, according to SNL Kagan, but if the FCC allows more freedom for pay TV companies to import the signals of other affiliates of CBS, NBC, Fox and ABC, it could damage the leverage that broadcasters have when negotiating retransmission fees.

On Tuesday, the National Association of Broadcasters sent the FCC a letter that faulted Wheeler's reasoning.

"The trouble with the Chairman’s apparent logic, however, is that the most relevant changes in the marketplace – MVPD and cable consolidation specifically – make the rules more essential than ever," writes Rick Kaplan, the group's executive vice president and general counsel. "The pay TV industry’s steady consolidation has transformed numerous smaller regional operators into nationwide behemoths that have much greater control over subscription-based television (to say nothing of their near total control of the broadband-to-the-home market)."

The NAB points to a study that the nation's five largest MVPDs — AT&T/DirecTV, Comcast, Charter-TWC, Dish Network and Verizon — now control 85.5 million subscribers. The group compares that to 1995 when the top five controlled 33 million. It adds, "The notion that the FCC would continue to go out of its way to help this mature and wealthy industry at the expense of local broadcasters flies in the face of the Commission’s core duty to act in the public interest."

In advance of Wheeler's proposal, the American Cable Association has touted various benefits to getting rid of exclusivity rules, from "protecting subscribers from being held hostage during broadcast blackouts" to issues of safety.

For example, a memo from June argued, "If carriage of signals deemed 'distant' under this legal framework is inhibited where weather typically travels from west to east, consumers who live more than 55 miles west of a 'local' metropolitan area have far less time, if any, to react to a 'local' meteorologist’s report that a potentially dangerous weather system is approaching. By the time a 'local' station reports that a severe storm is threatening the station’s community of license, people living far west of that city likely are already experiencing severe weather conditions, with little or no advanced warning."