Retrans Review Threatens Local Exclusivity

The broadcasters scored a big win in Washington this week when the FCC, by a 5-0 vote, launched a review of its retransmission consent rules that will not even consider the agency assuming the authority to order restoration of broadcast signals or mandatory arbitration when retrans negotiations break down.

The law limits what the FCC can do, Chairman Julius Genachowski said immediately prior to the vote. “The jury is still out on whether those measures are necessary or desirable, but if they are, it will require statutory change….”

Cable and satellite had pressed hard for a stronger FCC hand in regulating negotiations. If they still want it, they are going to have to go to Capitol Hill, where making things happen are 107 times tougher. (Do the math: 535 legislators and only five FCC commissioners.)

However, it was not a total victory for broadcasters. Deep within the rulemaking — Paragraph 42, to be exact — the FCC, at the prompting of cable and satellite, proposes eliminating its network non-duplication and syndicated exclusivity rules. The rules, in essence, give stations a means of enforcing the local exclusivity that they get from their networks and syndicators.

This is no small matter. Without non-dupe and syndex, the negotiating position of stations would be dramatically eroded. Unable to come to terms with a local ABC affiliate, a cable system could simply import an affiliate from the next market over with impunity, assuming the system had, one way or another, obtained retrans consent from the out-of-market station. Sure, viewers would lose the local news of the local stations, but even in the smallest markets there are still one or two local news alternatives.

The FCC rulemaking suggests that the rules may no longer be necessary since stations can enforce their local exclusivity rights in court.

But independent TV-Fox-ABC-Disney lobbyist emeritus Preston Padden, who now teaches the University of Colorado, points out that that simply is not true. In fact, he says in a missive he sent to broadcast lawyers and lobbyists following the FCC vote, broadcasters would find little help in court because of the compulsory license, which goes back to 1976 and which allows cable and satellite operators to import out-of-market signals without infringing anybody’s copyright.

“We need to educate the FCC (and the rest of the civilized world) ASAP that there can be no judicial/marketplace enforcement of a broadcaster’s exclusive program rights as long as the Compulsory Licenses give cable/satellite a statutory license to retransmit broadcast programming.”

According to Padden, who was actually there when all this was being cooked up by lobbyists and policymakers in the early 1970s, one of the reasons broadcasters agreed to the compulsory license was because they were assured of the protections of syndex and non-dupe.

This non-dupe scenario played out in December during a retrans dispute upstate New York. Denied retransmission consent by Smith Media for its affiliates in Utica, N.Y., and Burlington, Vt.-Plattsburgh, N.Y., Time Warner Cable began importing affiliates of the same networks from other markets. In Utica, Time Warner replaced Smith’s NBC affiliate WKTV with Nexstar’s WBRE Wilkes Barre-Scranton, Pa.

Meanwhile, in Burlington-Plattsburgh, TWC replaced ABC affiliate WVNY with Nexstar-managed WUTR. Also in the market, it replaced Fox affiliate WFFF with WNYF-CA Watertown, N.Y.

With a lot of Uticans wondering why they were getting weather reports for Scranton, the two sides finally came to an agreement on Jan. 8 with each pronouncing they were pleased with the terms. Order was restored.

In addition to underscoring the importance of non-dupe, the Smith Media case is instructive for a couple of other reasons:

Lesson One: Some stations apparently don’t have local exclusivity built into their network affiliation contracts. Smith Media had to run to NBC and ABC to get exclusivity provisions, which, to their credit, they quickly provided. Check with your lawyer today. If you don’t have an exclusivity provision, get it before the next retrans negotiation comes up.

Lesson Two: Nexstar, in its blanket retrans agreement with Time Warner Cable, gave the cable operator permission to import any of its stations into other TWC markets. I’m told that this permission was in the boilerplate of the Time Warner-written agreement. You’ve can’t let that kind of stuff get by you.

Allow me one other word of caution, this one for the Fox affiliates who are angry over network’s take-it-or-leave-it approach in the sharing of retrans revenue. In new affiliate agreements, Fox is demanding a fixed amount from each affiliate, regardless of what the affiliate is now getting from cable and satellite operators or what it could reasonably get in the future.

In the hope of getting relief, some affiliates have considered going to Washington and complaining that they need protection from the networks on the ground that Fox’s excessive demands will ultimately drive up cable rates. The retrans rulemaking would be a good place to vent. In fact, the FCC opens the door with questions about network involvement in the retrans negotiations of their affiliates.

Don’t do it.

With the launch of the rulemaking and simmering concern on the Hill, it’s a bad time for any broadcaster to join the chorus of cable operators in charging that retrans is inflating grandma’s cable bill. No broadcaster can allow the intramural scrap over retrans affect how much broadcasting is taking in from cable and satellite.

Plus, despite its questions about network involvement, the FCC says in the rulemaking that it doesn’t care who ends up with the retrans money. “[W]e do not intend to interfere with the flow of revenue between networks and their affiliates,” it says.

I don’t know what the Fox affiliates can do to get the network to back off. But I doubt the solution is in Washington.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read his other columns here.