Must We Feud Over Network Rep Rule Again?

When FCC Chairman Ajit Pai announced at the NAB Show last April a plan to eliminate outdated and counterproductive media rules, I feared he was opening a can of worms.

My chief concern was that out of the proceeding would crawl a major new push by cable and satellite to meddle with retransmission consent and the two rules that buttress it, syndicated exclusivity and network nonduplication.

For the most part, that hasn’t happened. The chief cable trade associations — NCTA and the American Cable Association — steered clear of retrans in submitting their deregulatory wish lists, although the NTCA-The Rural Broadband Association and Verizon couldn’t resist bringing it up.

Most who replied to Pai’s initiative understood his intention to go after “regulatory underbrush” that mostly adds to media companies’ administrative payroll and legal bills rather than the trees that constitute agency policy.

But one worm has wiggled out to remind me that the networks and affiliates still don’t entirely trust one another.

Last month, CBS, Disney, Fox and Univision included in their wish lists a request to do away with the 59-year-old network rep rule, which bars the networks from repping their affiliates in the spot market.

The four networks said they understood that the rule was originally intended to limit their influence over affiliates and foster competition, but that it no longer reflects “marketplace realities.”

“[T]he rule imposes a categorical ban on a network’s representation of any of its affiliated stations — even those that may desire to receive the additional revenue and other financial and operational benefits that could result from such representation.”

The big networks usually work in lockstep on these kinds of regulatory matters. But NBC is sitting this one out. I’m guessing it’s because the rep rule means even less to NBC given the complexity of the regulatory issues it must deal with in light of its Comcast ownership.

This particular worm did not go unnoticed by the affiliates boards of ABC, CBS and Fox and their hyper-vigilant lawyers Mark Prak (ABC) and John Feore (CBS and Fox).

The “prohibition remains an important structural barrier to networks using economic leverage to eliminate competition from affiliates in the national spot market,” they told the FCC. “To eliminate it would be to undercut one of the economic pillars of localism.”

In opposing the networks’ move, the affiliates are also carrying water for Katz Television and Cox Reps, the two independent rep firms that are already facing some significant challenges, including declining interest in spot by cost-conscious media buyers and clients who are constantly trying to trim their commissions.

The last thing they need is the networks cutting into their business in any way.

The FCC staff twice proposed eliminating the rep rule — once in 1980 and then again in 1995. In the face of strong opposition from the affiliates, the proposals were shelved and eventually withered away.

Having been taught in biology class that spontaneous generation doesn’t naturally occur, I presume that the networks were behind the previous efforts as they are the current one.

I’m don’t know why the networks brought up the rep rule in this context. It might be that they have designs on the spot market and want to do it in league with their affiliates. Or, it could simply be that the rule sticks in their craws and they don’t want to miss any opportunity to be rid of it.

I sought some explanation from them. CBS said it had no comment beyond its FCC filing. I’m still waiting on Fox and ABC at deadline.

I appreciate the affiliates’ concern. They don’t want to turn over their national inventory to the networks, which would have every incentive to favor their own time over the affiliates’ every time they are in front of a media buyer.

They also don’t want to give the networks another way to grind them at affiliation renewal time. They’re having a hard-enough time resisting the networks’ ever-increasing demands for reverse comp.

At the same time, I’m not a big fan of using government regulations to manage competition and, when it comes to national advertising, the networks and their affiliates are competitors. The FCC should stay out of the competitive fray whenever possible.

Yes, there are good arguments on both sides, but this is not the time for them.

Chairman Pai has presented broadcasting with a rare opportunity to get rid of some truly useless rules and to streamline others. The networks and the affiliates need to avoid mucking things up with an internecine fight.

Since it was the networks that unleashed this worm, it’s up to them to put it back in the can. As the underbrush proceeding progresses, let’s hear no more about the network rep rule.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here. You can read earlier columns here.