Retrans War Heats Up

FCC inquiry fuels dueling meetings

Why This Matters

WHY THIS MATTERS
The FCC will be focusing on retransmission consent negotiations at the direction of Congress.

Cable operators and broadcasters, veterans of a long-fought war over blackouts and pricing, are set for battle once again. The FCC’s congressionally mandated review of the “totality of circumstances” definition of good faith retransmission consent negotiations has helped rekindle the fiery rhetoric between both sides. Broadcasters have charged cable operators with “manufacturing” disputes to get the FCC to step in, while cable operators say the process is broken and needs fixing.

Per language in the STELAR satellite reauthorization bill, which was itself a way to accommodate some cable critics of the retrans regime without holding up that must-pass legislation last year, the FCC is currently gathering string on what should constitute fair, or unfair, negotiations.

In a meeting with FCC Media Bureau chief Bill Lake (the Media Bureau is helping grease the engine of the retrans review), National Association of Broadcasters execs said that while most retrans negotiations are “seamless,” there are some figures in the pay-TV industry (it did not name names) who “appear to have developed a strategy of manufacturing retransmission consent disputes to spur the government to regulate more heavily in this arena.”

The NAB signaled that if the FCC sees an “uptick” in disputes as it considers the good faith review, it should not be surprised.

At the meeting, broadcasters were particularly concerned about the possibility that the FCC could scrap the network non-duplication and syndicated exclusivity (Syndex) rules, something the commission at least contemplated in opening a retrans inquiry under then-chairman Julius Genachowski.

Those rules prevent cable operators from importing distant or out-of-market versions of syndicated or network programming that duplicates whatever is on the local market stations with which they are negotiating retrans.

Cable ops have long considered those rules to be a thumb on the retrans scale in favor of broadcasters. Broadcasters argue—and did again in the meeting with Lake—that the rules are instead a “counterweight” to the compulsory copyright license that relieves cable operators of the need to negotiate for the underlying content on a station. Retrans involves the signal, which is treated as separate from the content.

The NAB said flatly that if the FCC made it easier for cable operators to import out-of-market signals, it would lead to more disruptions—NAB does not use the term blackout.

In a slide show included in the meeting, the NAB further threatened that they would enlist their audience in the fight, if necessary: “Broadcasters will be forced to hold out and engage local viewers to stop the importation of distant signals.”

Savings Might Come With A Cost

Cable operators have argued that if the FCC allows multichannel video programming distributors the option to import out-of-market signals, it could lead to negotiating lower retrans fees, which would benefit consumers.

But the NAB had a ready response to the price argument: “If cable truly believes that eliminating exclusivity will help them lower rates, then FCC should ensure that any cost savings go to consumers and not cable operators,” it said.

The American Television Alliance (ATVA) was not about to let the NAB arguments go unchallenged.

ATVA members include MVPDs and others pushing for retrans reforms, and they were out in force for their own meeting with Lake.

In something of a full-court press, according to the ex parte filing, among those present were representatives of the National Cable & Telecommunications Association, American Cable Association, U.S. Telecom, DISH, Time Warner Cable, DirecTV and others.

They told Lake that a retrans overhaul was necessary because the rules “are not strong enough to combat the variety of ways that a broadcaster can exercise its leverage to extract higher fees and force blackouts.”

ATVA said the FCC should, at the very least, consider making the following per se evidence of bad faith negotiations:

1. Blocking online access to their content during an impasse.
2. Bundling “cable network, non-broadcast programming, multicast programming, duplicative stations, or a significantly viewed station” in a retrans negotiation.
3. Withholding a signal during a “top-rated marquee event,” which is defined as a “television program for which the most recent telecast of that event or comparable programming received a nationwide Live + Same Day U.S Rating of 7.00 or greater on the Persons 2 + demographic by Nielsen.”
4. Preventing an MVPD from importing out-of-market signals during impasses.
5. Allowing a network to negotiate or have approval rights over a retrans deal.
6. Terms such as broadcasters requiring a set-top for each set in a home or other restrictions on equipment.
7. Demanding per-sub payments that include non-video subs or subs getting TV stations off-air.

The FCC was required by Congress to launch a review of its good faith negotiations oversight by the beginning of September.

GAME ON FOR FILMON?

FilmOn founder Alki David calls his firm’s recent court victory a “huge ruling” that benefits everyone. Broadcasters see it rather differently.

California district judge George Wu two weeks ago ruled that FilmOn, which streams on-demand and day-and-date video online, should get a compulsory license to deliver broadcast TV network programming, just as multichannel video programming distributors have. He did so in issuing a summary judgment for FilmOn and against the major broadcast networks, led by Fox.

The issue is whether online video distributors are effectively MVPDs eligible for the statutory license that allows them to avoid negotiating for individual network broadcast content. That issue is unsettled, with the Copyright Office saying they aren’t eligible, but also saying that could change depending on what the courts and the FCC decide. The FCC is mulling defining some over-the-top distributors as MVPDs, and FCC chairman Tom Wheeler has pointed to the need to prevent “old rules” from hampering online video competitors.

David pushed the FCC to endorse FilmOn in its decision, and said last week that he expected it would be the case.

Judge Wu’s ruling conflicts with a Second Circuit federal appeals decision that OTTs are not eligible for a compulsory license, which Wu recognized in authorizing an immediate appeal of his own decision to the Ninth Circuit federal appeals court.

A Fox source on background confirmed it would indeed be appealing the decision.

Wu stayed the effective date of his summary judgment pending the outcome of the Ninth Circuit appeal, but the Second Circuit ruling that FilmOn does not merit a compulsory license stands in the meantime.