FCC Looking at Online Blocking, TV Channel Bundling in Retrans Negotiations

Tom Wheeler FCC - H 2013
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Tom Wheeler FCC - H 2013

As part of the STELA Reauthorization Act of 2014, the Federal Communications Commission is reviewing what constitutes "good faith" when broadcasters and distributors negotiate retransmission consent licenses. This means that the media regulatory agency aims to establish protocol before TV viewers suffer blackouts when companies like DISH Network and Sinclair, Cablevision and Viacom, or CBS and Time Warner Cable engage in a standoff.

In a notice of proposed rulemaking put out on Wednesday night, the FCC invited commentary and asked some leading questions.

One of the highlights is the FCC looking at the practice of broadcasters who might block online access to their programming in order to gain leverage in a negotiation.

"Should causing consumers harm to enhance negotiating leverage generally be a factor that we should consider as evidence of bad faith under the totality of the circumstances test?" the FCC asks.

Also being examined is the practice by some broadcasters to bundle channels in negotiations with distributors. It's a topic that's currently the focus of a pending antitrust lawsuit brought by Cablevision, and while the FCC acknowledges certain arguments in favor of bundling such as the potential to increase diversity of programming, it also strikes a skeptical tone.

"If a broadcaster requires MVPDs to purchase less popular programming in order to purchase more desired programming, the MVPDs may be forced to pay for programming that they do not want and may in turn pass those costs onto consumers," writes the Commission.

In a research note, Guggenheim Partners analyst Paul Gallant writes that the "rulemaking is a potential new headwind for broadcasters and media companies, and a boost for cable/telcos," and that the "the FCC may be shifting its hands-off tone."

The notice also includes discussion of other hot topics like exclusivity rules that prevent cable and satellite companies from importing out-of-market TV signals in the face of retransmission disputes. Broadcasters have fought hard against a change and a vote on that subject could be coming soon.