FCC Trumps Hill On Retrans Reform Action

The pay TV industry has scored points in its continuing campaign to reform retransmission consent, both on Capitol Hill and at the FCC — but any significant additional reforms this year are more likely to come from the agency than Congress, industry lobbyists say.

“The bigger threat on retrans looms at the FCC with a chairman who is demonstrably hostile to the terrestrial broadcast system,” says one leading broadcast attorney who asked not to be identified.

The pay TV industry scored its first regulatory victory in its ongoing reform battle on March 31, when the FCC adopted a new rule barring two or more separately owned top 4-rated stations in the same market from negotiating retrans deals together.

At the time, Tom Wheeler, the former lobbyist for the cable and wireless industries who now chairs the FCC, said a change was needed to put a damper on fees that pay TV operators routinely pass along to subscribers.

“This should benefit the consumer by removing the leverage of collusion,” Wheeler said after the FCC voted unanimously to adopt the new prohibition. “All we’re doing today is leveling the negotiating table.”

An even tougher provision that would bar any independently-owned TV station in a market from negotiating retrans deals together — not just limited to top four stations — was subsequently included in a satellite TV bill approved by the House Energy and Commerce Committee on May 8.

The House retrans reform provision was part of a bipartisan deal clearing the way for committee approval of a bill reauthorizing the Satellite Television Extension and Localism Act, or STELA, for five years.

Yet another provision included in the committee’s STELA bill, which would clear the way for satellite TV companies to continue retransmitting distant TV signals into some local markets, would eliminate a regulation that currently bars pay TV operators from dropping broadcasters during ratings sweeps periods.

Pay TV industry lobbyists have continued to urge federal lawmakers and regulators to institute additional reforms aimed at substantially reducing broadcast retrans negotiating leverage.

The pay TV industry has been targeting STELA for reform provisions, because STELA is the only communications-related legislation widely expected to have a reasonable chance for being approved this year.

But industry lobbyists say that key lawmakers are unlikely to win approval of a STELA bill that doesn’t have widespread support, and therefore any bill that’s ultimately approved is unlikely to include provisions that are unduly controversial.

Patrick Leahy  (D-Vt.), chairman of the Senate Judiciary Committee, one of four committees with jurisdiction over the legislation, has made clear that he would prefer a “clean” STELA bill.

“A STELA reauthorization should not be partisan or controversial,” said Leahy, in a statement during his committee’s March 26 STELA hearing.

“They [cable and satellite TV companies] have gotten all they’re going to get,” says a broadcast attorney, of the limited reforms already included in the bipartisan House Energy and Commerce Committee bill.

Whether Congress ever takes additional steps to reform retrans or not, Wheeler has already teed up a further notice of rulemaking seeking comment on whether to eliminate the agency’s network nonduplication and syndicated exclusivity rules, regulations that make it easier for stations to protect the exclusivity of their programming in  their markets.

Without the regulations, broadcasters would still be able to protect their exclusivity, but would have to rely on the courts, instead of the FCC, to enforce the protections, adding to the hassle and the expense for the broadcaster.

“He’s going after the broadcasters,” one broadcast industry attorney says.

Wheeler may also try to curb the ability of broadcasters to block cable and satellite subscriber access to their online content during retrans disputes — or to black out broadcast programming altogether — as violations of their existing legal obligation to negotiate retrans deals in good faith, one pay TV industry insider predicts.

Even though broadcast lobbyists don’t believe STELA is the most serious threat, they will be keeping a close eye on it. Pay TV executives are still trying to load it with provision that would hobble broadcasters in their hunt for retrans dollars.

The STELA legislation as approved by the House Energy and Commerce Committee “is an excellent start,” said R. Stanton Dodge, Dish EVP-general counsel, during a May 8 STELA hearing before a House judiciary subcommittee. “But more is necessary to accomplish the fundamental goal of ensuring that broadcast programming fulfills its public interest mandate and always stays up for consumers.”

Some pay TV interests want a “standstill” provision that would require broadcasters to continue providing their signals during retrans disputes at the old rate, with retroactive payments for any increases due when a new deal is finally struck — perhaps with the assistance of baseball-style arbitration.

As an alternative, Dish Network wants Congress to allow pay TV companies to import distant network station signals when the local network affiliate withholds its signal.

The American Cable Association, another leading proponent of retrans reform, wants Congress to include a provision in STELA that would bar broadcasters and their networks from blocking cable and satellite subscriber access to their online content during retrans disputes, said Matt Polka, ACA president-CEO, in his own testimony for the judiciary subcommittee hearing.

In addition, Polka wants Congress to include a provision in STELA that would eliminate the “must-buy” requirement that requires cable TV systems to include retrans signals in their basic tiers — tiers that all subscribers must pay for before getting other cable channels.

Senate Commerce Committee Chairman Jay Rockefeller, (D-W.Va.) who has a big seat at the STELA table, is expected to introduce his own version of the satellite reauthorization bill next month, and his bill is expected to include a variety of regulations and ”is going to have something that everybody is going to hate” in it, according to a broadcast attorney.

“NAB intends to remain vigilant,” said NAB spokesman Dennis Wharton. “We’re in the third inning of a nine-inning game.”