Washington

FCC Says Program Carriage Standstill Is Needed

NCTA calls decision unfortunate and disappointing, says it will "explore other avenues for redress" 8/01/2011 12:16:20 PM Eastern

As expected, the FCC has released its program carriage order, which provides for standstills during program carriage disputes or price and "true ups" for winners of complaints over price or discrimination

It also seeks comments on other proposed changes, including being able to collect damages in program carriage cases, defining retaliation as a form of discrimination, and codifying who bears the burden of proof (there was some confusion in the WealthTV complaint).

The National Cable & Telecommunications Association, which pushed against the standstill, was not pleased.

"The FCC's program carriage decision represents an unfortunate trifecta: a flawed process that the FCC stubbornly refused to correct, substantive policy discussions that show little regard for the limits of agency authority or constitutional rights, and a disturbing lack of appreciation of the potential impact of government intervention on consumers or the marketplace," said NCTA President Michael Powell in a statement. "In other words, we are profoundly disappointed not only in what the FCC did but how they did it. Regrettably, we must now explore other avenues for redress." NCTA did not say whether that would mean taking the FCC to court.

The order makes clear that while the FCC is, among other things, giving guidance on what will provide prima facie evidence of a complaint, that finding is not the same thing as judging it on its merits or that it might not meet other thresholds, like filing within the statute of limitations.

The commission majority -- FCC Commissioner Robert McDowell dissented from the standstill portion of the rule changes, found that "the record reflects that, absent a standstill, an MVPD will have the ability to retaliate against a programming vendor that files a legitimate complaint by ceasing carriage of the programming vendor's video programming, thereby harming the programming vendor as well as viewers who have come to expect to be able to view that video programming."

To remedy that, the commission says programmers can file a request for standstill that needs to demonstrate that "the complainant is likely to prevail on the merits of its complaint; (ii) the complainant will suffer irreparable harm absent a stay; (iii) grant of a stay will not substantially harm other interested parties; and (iv) the public interest favors grant of a stay."

In making that case, says the FCC, cable operators get to talk about the impact on subscribers and the extent to which the programming vendor's advertising and license fee revenues will be hurt without the standstill.

The FCC has the discretion to define the standstill or continue it until the complaint is resolved -- or lift it if it is hurting negotiations.

If the issue is price and carriage has continued during the complaint, either side will have to make up the difference depending on what the resolution is. If the cable operator has been charging too much, they will have to refund the difference between what they were paying and what the FCC says they should have been paying. If it is the other way around, the programmer will have to give them credit for the deference.

But if the issue is a channel that has never been carried, just how a standstill/true-up payment process is not as clear, a point the FCC concedes. "29. We note that program carriage complaints do not entail solely price disputes. Rather, complaints may entail the issue of whether the MVPD should be required to carry a programming vendor's video programming at all or whether the MVPD should carry the video programming on a specific tier. In these cases, it may be difficult to apply the new terms to the standstill period, especially in cases where the adjudicator does not ultimately order carriage. Despite these complications, we believe that the adjudicator can address these issues on a case-by-case basis."

The FCC provides some guidance in the Notice of Proposed Rulemaking (NPRM) portion of the decision.

The order concedes that the FCC's slow-grinding wheels has not helped expedite the complain process: "The unpredictable and sometimes lengthy time frames for Commission action on program carriage complaints have discouraged programming vendors from filing complaints," it said, before outlining new deadlines in the order it said needed to be codified. The goal of the order is to get complaints resolved within 7-10 months if only the Media Bureau is involved and 240 days if the case has to go to an -- currently "the" -- FCC administrative law judge.

The Media Bureau will have to release a decision on whether the complainant has established a prima facie case within 60 days of its receipt of an complainant's reply to the defendant's answer to their complaint. But it also warned complainants not to raise any new issues in those replies.

The bureau will then get another 60 days to rule if it has concluded it can make the decision itself based on those proceedings. If it instead concludes that more fact-finding is needed to make a decision, it has to rule within 150 days of its prima facie determination.

For complaints that the Media Bureau refers to an Administrative Law Judge, the judge will have to make his recommendation within 240 days of either party saying they will not pursue alternate dispute resolution (ADR) or if that ADR fails, though the FCC said it expects it to take less time if it refers issues to the ALJ rather than the entire complaint.

The FCC spelled out the highlights of the order and NPRM this way. The order:

  • "Codifies in our rules what a program carriage complainant must demonstrate in its complaint to establish a prima facie case of a program carriage violation;
  • Provides the defendant with 60 days (rather than the current 30 days) to file an answer to a program carriage complaint;
  • Establishes deadlines for action by the Media Bureau and Administrative Law Judges ("ALJ") when acting on program carriage complaints; and
  • Establishes procedures for the Media Bureau's consideration of requests for a temporary standstill of the price, terms, and other conditions of an existing programming contract by a program carriage complainant seeking renewal of such a contract."

The new rules apply only to future complaints, not ones -- Tennis Channel, Bloomberg TV -- currently in the pipeline.
 
The FCC also issued a notice seeking comment on the following:
 

  • "Modifying the program carriage statute of limitations to provide that a complaint must be filed within one year of the act that allegedly violated the rules;
  • Revising discovery procedures for program carriage complaint proceedings in which the Media Bureau rules on the merits of the complaint after discovery is conducted, including expanded discovery procedures (also known as party-to-party discovery) and an automatic document production process, to ensure fairness to all parties while also ensuring compliance with the expedited resolution deadlines adopted in the Second Report and Order in MB Docket No. 07-42;
  • Permitting the award of damages in program carriage cases; 
  • Providing the Media Bureau or ALJ with the discretion to order parties to submit their best "final offer" for the rates, terms, and conditions for the programming at issue in a complaint proceeding to assist in crafting a remedy;
  • Clarifying the rule that delays the effectiveness of a mandatory carriage remedy until it is upheld by the Commission on review, including codifying a requirement that the defendant MVPD must make an evidentiary showing to the Media Bureau or an ALJ as to whether a mandatory carriage remedy would result in deletion of other programming;  
  • Codifying in our rules that retaliation by an MVPD against a programming vendor for filing a program carriage complaint is actionable as a potential form of discrimination on the basis of affiliation and adopting other measures to address retaliation; 
  • Adopting a rule that requires a vertically integrated MVPD to negotiate in good faith with an unaffiliated programming vendor with respect to video programming that is similarly situated to video programming affiliated with the MVPD; 
  • Clarifying that the discrimination provision precludes a vertically integrated MVPD from discriminating on the basis of a programming vendor's lack of affiliation with another MVPD; and
  • Codifying in our rules which party bears the burden of proof in program carriage discrimination cases."
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