JESSELL AT LARGE

Retrans Review Threatens Local Exclusivity

While the just-announced FCC review of its retransmission consent rules doesn’t include commission intervention when talks fail, there are some things broadcasters need to be wary of. Most important is the proposal to eliminate the non-dupe rule. Without it, cable systems would be able to import an affiliate from a another market to replace one that it loses in a retrans dispute with impunity.

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.

BRAND CONNECTIONS

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.


Comments (7)

Leave a Reply

Gregg Palermo says:

March 4, 2011 at 4:36 pm

Local markets: What a quaint notion. Isn’t it fun dealing with laws from the 1970s in 2011? I thought it was goodbye to the yellow brick road.

Teri Green says:

March 4, 2011 at 5:00 pm

Markets should be a thing of the past. Just have a national station for each of the major networks. Define major networks strictly as broadcasting original programing, 7 nights a week at least three hours in prime time, etc etc.

Those networks would just have repeater stations. Then you could put small independent stations broadcasting DTV or HDTV 720p (so you could put 2 HDTV or 6 DTV) into each market. Then sell of the remaining spectrum. TV is important but the Internet is better use

    jeff lee says:

    March 7, 2011 at 4:27 pm

    “Internet is better use”
    Yea…more porn!

Michael Peschio says:

March 4, 2011 at 5:38 pm

As someone who spent time walking the halls of Congress in the 1980’s with Mr. Padden in helping get the original Satellite Home Viewer Act passed, Syndex, network non-duplication and retransmisson consent/must-carry are the three pillars of local broadcasting in the U.S. I was dumbfounded the FCC would consider attempting to turn over exclusivity fights to the Courts, bypassing a wealth and history of the FCC’s own knowledge of how said rules should be enforced to courts who know nothing about the subject. The system in place has worked, providing at least some limited counterweight to the monopoly powers the Supreme Court pointed to in the Turner decision of 1997, which they reaffirmed in 2010 without comment. Giving cable systems the right to import distant signals to avoid enforcement of local exclusvity bought and paid for by local broadcasters would be a mistake that would seriously undercut the ability of local broadcast television to remain viable over the longer term. I hope the broadcast community understands the real potential impact of the rules proposed to be changed, and stops the commission from moving ahead with such a reckless and unneeded proposal to give cable back its near complete monopoly power in local television markets. The proposal to kill network non-duplication and Syndex is a backdoor to cable regaining the power they lost in the Cable Act of 1992, the Turner vs. FCC decision of 1997, and the failed attempt to overturn Turner of 2010.

    Manuel Morales says:

    March 4, 2011 at 6:05 pm

    TVCCS nails it.

Jill Colvin & Catherine Lucey says:

March 7, 2011 at 3:32 pm

As usual, the FCC is on the wrong side of the fence. The current standoffs like LIN are caused by the networks driving the minimum prices stations can accept. By eliminating non-dup, the the FCC is gicing MSO’s and Dish companies the ability to feed network shows during any dispute, thus weakening the free market power of the rights holders (Affiliates). the networks win either way and the local stations are the only losers. Is that the FCC’s plan, to kill the affiliates and use the broadband for higher speed nationwide access to music and porn on the web. The FCC needs to think before they speak and learn about the business they are charged with regulating. Why not demand a comparative pricing scheme based on viewership of channels. That would eliminate the standoffs and everyone but the least viewed, unwanted channels would win.

Sandy Hinkle says:

March 8, 2011 at 3:40 pm

For many years, the American Cable Association has warned that the retransmission consent regime is broken, socking consumers with higher bills and sudden TV station blackouts on the eve of major viewing events that millions of Americans don’t want to miss.
ACA is pleased that so many are now starting to listen. Reforming retransmission consent is a national priority because a surging mass of consumers across the country has come to see that the regulatory framework for access to broadcast signals adopted nearly 20 years ago is badly outdated and causing more harm than good. On March 3, the Federal Communications Commission took an historic first step by opening a rulemaking on retransmission consent, thus permitting ACA to document the many ways this regulatory framework permits TV station owners to abuse their market power.
ACA believes that true retransmission consent reform will not be achieved unless the concerns of small cable providers are addressed. Needed are rules that prevent broadcasters from charging discriminatory fees to small cable providers without any cost-based justification and rules that stop multiple TV stations from by entering into collusive arrangements to negotiate retransmission consent jointly in order to gain even more bargaining leverage over small cable companies.
Broadcasters like to say that retransmission consent is working fine because 99% of the deals get done without any fuss. If you’re an ACA member in a blackout battle, a statistic like 99% is absolutely meaningless. As of this writing, Entravision-owned WUNI continues to withhold its Univision signal from Full Channel TV, an ACA member in Rhode Island with about 7,000 customers. WUNI gratuitously pulled its signal on Feb. 18 after Full Channel balked at paying 33% more for retransmission consent and declining onerous demands for multichannel and high-definition format distribution.
Telling a Full Channel customer that 99% of retrans deals get done quietly is like telling passengers on the Titanic that the captain avoided 99% of the icebergs.
MATT POLKA, PRESIDENT & CEO, ACA


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