Road To FCC 3.0 Order Could Be Bumpy

From all I hear, broadcasters pushing ATSC 3.0 will get their wish. The FCC will authorize them to roll out the so-called Next Gen TV standard on a voluntary basis by the end the year. FCC Chairman Ajit Pai has made that his goal and his Republican sidekick Michael O’Rielly thinks the commission might get the order out by Halloween.

But this is not to say that the road to that order will be a smooth one.

The MVPDs — the cable and satellite operators — want nothing to do with 3.0 and they are staking out positions at the FCC squarely at odds with the 3.0 proponents.

As they are making abundantly clear to the commission, they want to regulate the transition to 3.0 to insure that the service they now provide to their paying subscribers isn’t disrupted and that they don’t incur any big expenses. They are also demanding some kind of rule that says the broadcasters cannot use retransmission consent to compel them to carry 3.0 signals.

“Among all the issues that will be raised by the [3.0 rulemaking], the MVPD issues will be the most heavily lobbied,” said communications attorney John Burgett at the ATSC’s annual conference in Washington last week.

Yes, carriage issues could gum up the rulemaking works, agreed FCC Media Bureau Chief Michelle Carey in a Q&A with former FCC Chairman Dick Wiley later in the conference. They are always big, she said. They “always take up a lot of our time and they are always legally complex.”

Most of the potential trouble stems from the plans for the transition to 3.0.

Because 3.0 signals are incompatible with all the ATSC 1.0 TV sets in use today, 3.0 broadcasters are proposing to set up “lighthouse” stations that would more or less simulcast the 3.0 channels using the 1.0 standard. In that way, OTA viewers and the MVPDs would continue to receive a fully compatible 1.0 service.

Broadcasters have asked that the FCC not mandate the simulcast channels or regulate them in any way — no rule requiring the 1.0 signals have the exact same programming as the 3.0 signal, no rule requiring they have the same coverage area and no rule requiring they have same picture quality.

The marketplace, the broadcasters have assured the commission, will guarantee that they offer the simulcasts and they don’t cheat on the programming, coverage and pictures.

Not so fast, say the MVPDs.

All those rules the broadcaster don’t want are, in fact, needed to prevent broadcasters from providing a diminished and degraded 1.0 broadcast service in their rush to 3.0, they say. If broadcasters are required to maintain a 1.0 service similar in all respects to today’s, the move to 3.0 won’t impact the services they now provide to their subscribers — or impose substantial new costs on them.

The biggest concern of the MVPDs is the leverage that the broadcasters have in retrans. They say that the broadcasters will use it to force them to carry the 3.0 signals — something they cannot easily do.

“ATSC 3.0 represents a major and very complex change in technical standards that would require massive and very expensive trade-outs of equipment, and would likely put pressure on consumer rates,” said NCTA, cable’s principal trade group, in its May 9 comments on the FCC’s 3.0 rulemaking.

Last March, the American Television Alliance of MVPDs alleged in an FCC filing that “multiple broadcasters” have already tried to force feed them 3.0 via retrans.

“In some cases, broadcasters have demanded that MVPDs carry the entire 6 MHz of the allotted ATSC 3.0 spectrum — no matter what service the broadcaster chooses to deploy using that spectrum. These demands, by their terms, contemplate carriage of non-broadcast services.”

ATVA didn’t mention any names, but it noted that the broadcasters were acting as Sinclair did when it used retrans to force MVPDs to pick up the Tennis Channel after Sinclair purchased it.

The MVPDs have some legitimate gripes, but the FCC should not turn them into another set of burdensome regulations.

I agree with the broadcasters when they say they have powerful marketplace incentives to provide attractive 1.0 simulcast channels.

The rollout of 3.0 will take years as consumer slowly replace their existing 1.0 sets with new 3.0-enabled ones. Remember, the broadcasters are not asking for a mandate that all new sets have 3.0 tuners.

“If a broadcaster fails to transmit [1.0 simulcast] content that viewers want to watch, ratings will decline and the station’s bottom line will suffer,” the NAB told the FCC. “The commission would be best served by relying on broadcasters’ business incentives to serve their viewers rather than increased and unnecessary regulation.”

And retrans is retrans. It’s a station’s right to ask for anything it wants in a negotiation just as it is the MVPD’s right to walk away from the table if the ask is too much.

It seems that the broadcasters have all the leverage in retrans today, but that wasn’t always the case — for more than a decade broadcasters couldn’t squeeze a nickel out of the operators — and it may not be the case in the future.

The dynamics of television are changing at a blistering pace. Who’s to say who will have the upper hand in five years or three years or even one.

As the broadcast proponents said in their comments: “The FCC should not place a regulatory thumb on the scale of these private negotiations in advance of any actual marketplace developments.”

Broadcasters’ call for a light regulatory touch on 3.0 has a good chance of being heard. It comes during the reign of Pai, the most deregulatory-minded FCC chairman since the Reagan-appointed Mark Fowler in the 1980s.

He has relaxed the national TV ownership rules and is bent on loosening the local rules. He is disassembling the prior FCC’s net neutrality regime and, just last week, he launched a proceeding to clear out media regulations that have outlived their usefulness.

The man is clearly not inclined to create new regs.

The 3.0 rulemaking is going to be a battle, but one in which the broadcasters are in a good position to win.

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