FCC Responds to Sinclair’s Challenge of Joint-Retrans Ban

Enumerates authority to impose prohibition
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WASHINGTON—Regulators have answered Sinclair’s challenge of their prohibition against joint retransmission negotiations in federal court. The Federal Communications Commission filed its brief in response to Sinclair’s petition to have the U.S. Court of Appeals for the D.C. Circuit review rules the commission the adopted last March banning the practice.

“The commission had good reason to believe that joint negotiation by top-four stations was especially harmful. Such stations are typically
affiliated with one of the four major broadcast networks. Due to their popularity, these ‘network affiliates have bargaining power’ when they negotiate retransmission consent,” the commission’s brief states. “That power is
magnified when two or more top-four stations in the same market jointly negotiate carriage.”

Sinclair said the FCC was overstepping its authority in its Sept. 16 brief to the court asking it to vacate the rules.

“The commission’s actions exceeded its statutory authority, were arbitrary and capricious, lack any rational foundation in the record, and should therefore be vacated by this court,” it said.

The FCC’s rules traditionally required “good-faith negotiations” between the participating parties. Sinclair noted those rules had been in place for many years without a significant number of complaints. Retransmission consent deals are often strident and played out in the press, but ultimately hammered out under private terms.

One of the main problems within the retransmission frameworks has to do with the size of the players. Independent cable operators such as those represented by the American Cable Association are small and haven’t the resources to negotiate with the same heavy artillery as a Disney, with its myriad cable channels, including ESPN. Broadcaster who don’t have a network behind them, however, are at a disadvantage to the likes of Comcast and Time Warner Cable, which are in the process of merging.

“Sinclair complains that the commission refused to consider record evidence that MVPDs typically have ‘greater bargaining leverage’ than broadcasters,” the commission said, referring to multichannel video programming distributors, or cable and satellite TV operators. “The evidence was irrelevant to the agency’s analysis here. The commission rightly rejected the notion that it ‘should permit joint negotiations’ to promote ‘a level playing field for stations in markets where an MVPD had significant bargaining leverage.’

“It is not ‘the commission’s role in the retransmission consent process to adjust bargaining power between suppliers and their customers by countenancing anticompetitive practices.”

The commission further argued that it is within its purview to issue the per se rule versus reviewing each case individually.

Pressure from MVPDs motivated the rules change. Petitioners include American
Cable Association, Bright House Networks, Cablevision, Charter, Dish, DirecTV, Insight, Mediacom, Time Warner Cable, Verizon, Suddenlink, New America Foundation, Public Knowledge and the Organization for the Promotion and Advancement of Small Telecommunications Companies.

“This proceeding began with a petition for rulemaking,” the FCC’s brief said. “As the commission noted in the NPRM, the petition argued that a ‘recent shift of bargaining power to broadcasters has resulted in retransmission consent negotiations in which MVPDs must either agree to the significantly higher fees requested by broadcasters or lose access to programming.’ This concern that broadcasters were using ‘undue bargaining leverage’ to obtain ‘higher
retransmission consent fees’ led the agency to adopt the rule banning joint negotiation.”

The FCC asked the court to deny Sinclair’s petition for review.