In the wake of the recent well-publicized disputes between cable companies in the New York area and the Fox and ABC TV stations there, the major cable and satellite program providers (MVPDs) have asked the FCC to establish a new regulatory framework to govern negotiations for retransmission consent. During the New York disputes, the local Fox and ABC affiliates threatened to pull their programming, including New Year's Day football and the Oscars, off the affected cable systems.
Arbitration of disputes
The MVPDs are urging the FCC to impose a mandatory arbitration process and to require that MVPDs continue to carry stations when parties cannot reach a deal providing for retransmission consent. This system would come into play at any time a cable or satellite operator claims that the parties cannot reach an agreement. Once the dispute resolution process is invoked, the appropriate compensation level would be established by arbitrators rather than through direct negotiation between the parties. Because such a process could last for a year or more, during which the broadcaster could not pull its programs from their systems, the MVPDs would gain an advantage through the proposed regulatory scheme.
The proposal, if adopted, also would prohibit a broadcaster from demanding carriage of other programming services in return for the right to carry a broadcast signal. Such a demand would be considered a per se violation of the “good faith” negotiation requirement that will apply to preliminary negotiations. The MVPDs suggest that the FCC should allow such ancillary carriage arrangements, but only if the MVPD consents to them.
During the 18 years since passage of the Cable Act of 1992, which permitted TV stations to elect between negotiating retransmission consent agreements with MVPDs or invoking must-carry rights, the competitive environment has changed. In 1992 local cable systems had monopolies in terms of retransmission of local broadcast signals, making it difficult for the stations to achieve much more than basic carriage of their signals. In today's marketplace, however, local cable systems face competition from satellite providers such as DIRECTV and Dish Network, as well as from telephone companies such as Verizon with its heavily-marketed FiOS system. While more than 200 channels of nonbroadcast programming may sound tempting, the viewing public continues to demonstrate an affection for broadcast TV programming.
Broadcasters have substantially more bargaining power in this environment than they did in 1992 and can risk losing carriage by one MVPD because their programs will continue to be carried by the others in the market. Moreover, MVPDs cannot afford to lose carriage rights to their subscribers' most popular TV shows.
To add appeal to their plan, the MVPDs argue that their proposal is consumer friendly because it will eliminate the loss of popular TV shows due to ongoing private disputes. This may resonate with the commission given the public outcry that occurred over the threatened disruption of sports programming and the Oscars earlier this year.
Advocacy on all fronts
There is a big political push behind the MVPD proposals. A letter was already sent to Congress raising the points to the House and Senate Commerce Committees. The NAB has fired back with its own letter to those committees. In Congressional testimony in March, Chairman Genachowski said the retransmission consent process “is a subject that should be looked at seriously . . . for a framework that works for consumers.” Ten days after the MVPD petition was filed, the FCC issued a public notice inviting comments on it. The extended deadline for comments was May 18.
Harry C. Martin is a member of Fletcher, Heald and Hildreth, PLC.
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