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BC/DC Blog: Cable Looks To FCC For Retrans Fixes

3/09/2010 09:55:54 AM

Veteran communications attorney says operators talking to regulators about retrans

Some Cable operators are looking to Washington for help with changes to the retransmission consent process.

That is according to one veteran communications attorney, speaking on background, who said he was even now engaged in “trying to fix the process.” A number of cable operators have signaled they would accept, even welcome, FCC intervention in the form of arbitration for retrans disputes, and keeping broadcast signals on their systems during contract fights.

They say the competitive landscape has changed, and that the combination of more alternatives for broadcasters to go to in a market, mandates that broadcast channels must be on the basic tier, prohibitions on cable seeking out other stations outside the market for similar programming, and mandatory must-carry have increasingly tilted the playing field toward broadcasters.

Broadcasters counter that the process simply gives them the chance to negotiate in the open marketplace for the full value of their programming, which dominate the list of top-rated cable shows.

The attorney said that there would soon be “mounting calls” for the FCC to step in to regulate rates on the basic tier by taking steps like mandatory arbitration, interim carriage deals, and more.

“I m pretty confident there will be a pretty formal look at this by the commission,” he says, but adds that it will be a long process–likely nothing this year–and that he wasn’t predicting the outcome. “I think the chairman is interested. I think he is wary of taking over the negotiation regime and imposing some rate regulation scheme, but I think everything is on the table given the way these negotiations are going.”

The interest in Washington has been peaked by retrans impasses between Time Warner and Fox that threatened college bowl games, and last week’s stand-off between Disney and Cablevision that threatened to cut off the Oscar telecast to some New York viewers. Time Warner retrans deals with Disney/ABC come due this summer.

The attorney says there are a couple dozen members of Congress now actively engaged on the issue and ready to “lean on the commission,” but that if the FCC signals that the chairman is going to launch a proceeding, it makes legislation less likely. Senator John Kerry (D-Mass.) proposed last week that broadcasters should not be entitled to pull their signals during impasses unless the FCC determines a cable operator is operating in bad faith.

“There are a range of potential remedies that parties are actively considering,” he said. “Some are really Hill-focused including getting rid of retrans [and] whether it should be replaced with a compulsory license regime for local stations. “You could also have congressional interest in more modest reforms that empower the FCC more clearly to award interim carriage or conduct binding arbitration, or address some of the structural problems, like extending the obligation to put broadcasters on the basic tier, which prevents consumers from making a la carte decisions about whether to purchase expensive programming.”

On extending carriage, he pointed out that in its order last fall narrowing the terrestrial exemption, the FCC asserted its authority to preserve the carriage status quo in those instances. “It isn’t clear why they could do it in that context, and not this one.”

He says also in the mix could be getting rid of syndicated exclusivity and network nonduplications rules to allow for easier importation of distant signals. He points out that that could mean overriding network-affiliation agreements that enforce exclusivity.

The FCC already has the power to enforce good faith retrans negotiations, and the attorney thinks it has the power to codify interim carriage rights or mandate arbitration within that authority. Unlike network neutrality, he says, the FCC has “pretty direct regulatory authority” under the Communications Act, though he concedes there will be “pretty robust” debate about the limits of that authority.

Small and mid-sized cable operators have long argued that the government needs to fix what they says is cost-discrimination between the retrans fees they are charged and those charged to larger operators for the same programming. They have also pushed for interim carriage during disputes.

The FCC may have the regulatory way forward, but whether it also has the will to step in is another matter, he says. “They are certainly not going to do anything immediately, but whether they have the will to impose themselves and regulate rates is a fair question, but I think there will be quite soon mounting calls for that.”

Broadcasters, who are starting to get tough in negotiations for cash for their signals, argue that the process is not broken and the government should not step in.

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