Last week we reported on the FCC’s Notice of Proposed Rulemaking (NPRM) triggered by the STELA Reauthorization Act of 2014 (STELAR). The NPRM has now been published in the Federal Register, which sets the deadlines for comments and replies. Comments may be filed by May 13, 2015 and replies by May 28. Comments and replies may be filed through the FCC’s ECFS online filing system; refer to Proceeding No. 15-71.
Some old, some new standards likely for MVPD, satellite market modification proceedings, thanks to Congress
When you think of satellite TV, with its nation-wide reach, you may not immediately think of “local” service. But local service is an important element of Sat TV, and the FCC is now developing a way to tweak local TV markets for satellite carriage purposes.
Carriage of a TV station’s signal, whether by terrestrial MVPD’s or by satellite services (i.e., DISH and DirecTV), is dependent to a significant degree on the market to which the station is assigned. A station’s local market affects both its claim to mandatory carriage and the MVPD/satellite operator’s ability to take advantage of the compulsory copyright license. But the market to which a station is technically assigned by Nielsen – whose DMAs are used by the FCC to define TV markets for carriage purposes – does not always reflect the station’s actual audience. In order to insure the ability of stations to better serve their local communities, the Commission has long provided a process for “market modification”, a process by which a station’s community of license can be added to or deleted from a particular Nielsen DMA. But that process has thus far been available only with respect to cable carriage.
Now the FCC is proposing a market modification process for satellite carriage as well.
This development doesn’t come as a surprise. Late in 2014 (as we reported), Congress passed the STELA Reauthorization Act of 2014 (STELAR), in which Congress spelled out how changes to local stations’ markets should be determined for satellite carriage. Congress ordered the Commission to adopt rules implementing Congress’s specifications. The FCC’s proposal would do just that.
The rules that Congress devised and the Commission has now proposed would treat market modifications in the satellite context largely as such modification have been treated in the cable context. Under current cable market modification rules, the Commission considers four factors in assessing a market mod request:
- Whether the station, or other stations in the same area, have been historically carried on the cable and/or satellite systems serving the community;
- Whether the station provides local service to the community;
- Whether any other station eligible to be carried by the cable or satellite system covers local news and events of interest to the community; and
- Evidence of over-the-air viewership in the community.
While the proposed satellite rules include these four factors, the proposal also incorporates a few significant changes, some affecting both cable and satellite market modification requests, and some applicable only to satellite market modifications.
First, a fifth factor would be included in both cable and satellite market modification proceedings. That new factor would require the Commission to determine whether the proposed modification would “promote consumers’ access to television broadcast station signals that originate in their State of residence.” In its Notice of Proposed Rulemaking (NPRM)the Commission tentatively concludes that this establishes a preference for market modifications to add communities where doing so would increase access to in-state programming. The Commission further tentatively concludes that no negative inference should be drawn in cases where the modification would not increase in-state access; in such instances this factor would simply be inapplicable.
Second, STELAR provided that satellite market modifications would not affect any subscribers’ ability to receive distant signals. Following that direction, the Commission proposes that viewers previously deemed to be “unserved” for purposes of the distant signal rules would continue to be treated as “unserved” even if a market modification allows those viewers to receive a new “local” signal. In other words, a viewer would still be able to receive the signal of a distant affiliate of the same network of a station added to that subscriber’s “local” market by modification.
Third, and potentially most importantly, STELAR provided that, regardless of other factors, a satellite provider would not be required to carry a station if it was “not technically and economically feasible” to do so using its existing satellites. That provision affords satellite operators an obvious opportunity to avoid carriage of stations regardless of any market modifications. Perhaps recognizing that this exception could, if not applied carefully, swallow the entire rule, the Commission proposes a number of conditions that would (in theory) protect broadcasters’ ability to enforce market modifications.
In particular, the Commission proposes that the “feasibility” defense will be available only in the context of a market modification proceeding – it could not otherwise be raised to deny carriage requests. Also, the satellite operator will bear the burden of demonstrating that implementing a modification would not be feasible. (In the NPRM the Commission requests comment on what types of evidence should be required to meet that burden.) Further, recognizing that the validity of a “feasibility” claim may be eliminated by eventual technical developments, the Commission requests comment on whether a satellite operator who obtains a “feasibility” exemption should be required to periodically report to the Commission, or the broadcast station, as to whether carriage of the station (pursuant to the market modification) in fact remains infeasible.
In analyzing the four (soon to be five) statutory factors applicable to market modification requests, the Commission has developed a standardized approach, specifying particular evidence that parties requesting (or opposing) modifications must present. The Commission largely proposes to use the same standardized evidence requirements with respect to satellite market modifications, with a couple of modifications. In light of the new fifth statutory factor favoring delivery of in-state programming, the Commission requests comment on whether there is any factual information which would be particularly applicable to that analysis (and which, therefore, proponents should be required to tender).
In what should be a non-controversial proposal, the Commission also proposes to update Section 76.69 (the market modification rule) to refer to the noise-limited service contour (NLSC), rather than the “Grade B” contour. The term “Grade B” contour defines the service area of an analog TV station. For digital stations, the NLSC is the relevant contour. The inclusion of “NLSC” in the rule is thus a housekeeping matter designed to keep the rule current. (Because the concept of “Grade B” contour remains relevant to some LPTV stations, that term will remain in the rule.)
Historically, only two types of parties have been entitled to file market modification proposals on the cable side: the broadcasters and cable operators who would be affected by the mod. The FCC is inclined to keep it that way for satellite proceedings as well, although comments disagreeing with that approach are invited. The Commission does contemplate that local governments, franchising authorities and the like would be able participate – whether in support or opposition – in satellite modification proceedings, even if such entities aren’t permitted to initiate such proceedings.
Any party filing a satellite market mod request would be required to serve copies of the request on all “interested parties”, a universe that includes any MVPD operator, broadcast licensee (or permittee, or applicant) or anybody else “likely to be directly affected” if the proposed mod were to be granted. The Commission asks whether franchising authorities and/or local governments should be deemed “interested parties” for this purpose. It’s especially interested in comments as to whether satellite market modification requests should be required to be served on local franchising authorities, since such authorities have no role in satellite regulation. (Obviously, the same isn’t true when it comes to cable.)
The proposed rules would also prohibit a satellite operation from dropping carriage of a commercial station or otherwise altering the status quo during the pendency of a market mod proceeding.
STELAR also authorized the FCC to revisit its definition of “community” for market modification purposes. Historically, that term – or, more precisely, the term “cable community” – has been defined (somewhat circularly) in Section 76.5(dd) of the rules. The same definition has been used for significant viewing purposes in the satellite context although, in areas where there is no pre-existing “cable community”, the separate term “satellite community” applies. “Satellite community” is defined as “a separate and distinct community or municipal entity (including unincorporated communities within unincorporated areas and including single, discrete unincorporated areas). The boundaries of any such unincorporated community may be defined by one or more adjacent five-digit zip code areas.”
Given Congress’s suggestion that the FCC can take another look at the definition of “community”, the Commission asks whether it should take the same approach for market modification purposes, i.e., using the “cable community” definition unless no such community is involved, in which event the zip code-based “satellite community” concept would apply. Alternatively, the FCC suggests that it might instead use a zip code-based definition – or some other definition entirely – for all satellite market mods. The Commission’s goal is to come up with a definition of community that “will most effectively promote consumer access to in-state programming”. Comments on these alternatives are invited.
Comment deadlines in this proceeding have not yet been established. Anyone interested in letting the Commission know their thoughts should check back here for updates.
Last month we reported on the FCC’s proposal to redefine the MVPD universe to include services “untethered” from any infrastructure-based definition – in other words, to include Internet-delivered, “over-the-top” services. The Media Bureau has now extended the comment deadlines in that proceeding. As a result, comments are now due by March 3, 2015 and reply comments by March 18. Comments and replies may be filed through the FCC’s ECFS online filing system; refer to Proceeding No.14-261.
FCC looks to open ranks of MVPDs to Internet-delivered services – a move that could save what’s left of Aereo
It looks like the universe of multichannel video programming distributors (MVPDs) is going to be expanding considerably. Previously populated by the likes of cable, MMDS and broadcast satellite operators, the MVPD universe is set to be redefined to include services “untethered” from any infrastructure-based definition … if, that is, a proposal laid out in a Notice of Proposed Rulemaking (NPRM) last month (and just published in the Federal Register) takes hold. The result should expand consumer options for video program service, and might even revivify whatever may be left of Aereo once Aereo exits the bankruptcy process. And even if Aereo doesn’t survive, we can look for new Aereo-like services.
The proposed redefinition of what it means to be an MVPD is part of the Commission’s overall effort to encourage innovation and serve the “pro-consumer values embodied in MVPD regulation”. It’s also one more reflection of the FCC’s embrace of the technology transition – from old-fashioned, relatively inefficient analog service to digital, Internet protocol (IP) delivery – that is sweeping virtually all aspects of U.S. communications.
The Communications Act defines MVPD as a person (or entity) who “makes available for purchase, by subscribers or customers, multiple channels of video programming.” The Act cites some examples – “cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor” – but makes clear that those are not the only possible MVPDs. So the FCC appears to have some latitude when it comes to filling in the blanks Congress left.
And that’s what it’s now trying to do.
Historically, the Commission has been less than consistent in its interpretation of what Congress meant, particularly with respect to whether a program distributor must control its own transmission path to qualify as an MVPD. A “transmission path” could include direct, wired connections between distributor and consumer, as in a cable TV system, or spectrum-based delivery, such as direct satellite broadcasters use.
Requiring MVPD’s to control their own transmission path would not be an unreasonable reading of the Act – and there’s at least some passing reference to “facilities-based competition” in the legislative history of the 1992 Cable Act that could support that approach. Consistent with that, back in the 1990s the Commission stated with seeming clarity that entities need not “operate the vehicle for distribution” or be “facilities-based” in order to be an MVPD.
But within the last few years, the Media Bureau has taken a different tack. In 2010 a company called Sky Angel U.S., LLC, asserted that it was an MVPD because it distributed multiple different video programs through a national subscription-based service delivered over broadband connections. In other words, Sky Angel used the public Internet – and no specific facilities of its own – as its transmission path, a factor which, the Bureau figured, disqualified Sky Angel from MVPD status. Under that rationale, other Internet-delivered services that have been springing up in recent years – Aereo and FilmOn, for two – were similarly on the outside looking in as far as being FCC-defined MVPDs.
In the NPRM, the Commission appears set to adopt a definition of MVPD that does not require control of any particular transmission path. While the NPRM does invite comments on the Bureau’s “transmission path interpretation”, the Commission makes abundantly clear that it’s not inclined to embrace that interpretation. Rather, the Commission is leaning toward a “linear programming interpretation” under which the statutory term “multiple channels of video programming” would be read to mean “prescheduled streams of video programming”. (The FCC uses the shorthand term “linear” to refer to such prescheduled streams.) In other words, an entity providing multiple channels of “linear” programming could be deemed an MVPD without regard to whether it happens itself to be using its own the transmission path.
While formal adoption of the linear programming interpretation would clear up at least some uncertainty, it would still raise additional questions. For example, should the definition of “MVPD” also include a minimum number of channels, or a minimum daily or weekly operating schedule? Should the telecast of events that are prescheduled but which occur only sporadically – think sports, for example – count as “linear”? If so, the subscription packages marketed by various professional sports (MLB, NBA, NHL, Major League Soccer) could become MVPDs – is that a good idea? (As to that latter question, the Commission is thinking that it should exclude from the definition of MVPDs entities that make available only programming that they themselves own – a tweak that would remove the sports leagues, among others, from MVPD-dom.) The FCC is seeking input on these and related questions.
Those with MVPD status enjoy certain privileges and are subject to certain regulatory obligations. The privileges provide MVPDs (a) some protection in their ability to license cable-affiliated programming and (b) assurance that broadcasters will negotiate in good faith for carriage of broadcast programming (and also that broadcasters will not enter into any exclusive carriage deals with other MVPDs). The obligations cover a variety of areas, ranging from relatively broad concerns of program carriage and retransmission consent to nitty-gritty day-to-day chores like closed captioning, video description, accessibility of emergency information to persons with disabilities, EEO and CALM Act compliance and the like.
A redefinition of MVPD that significantly expands the universe of MVPDs could expose to new regulatory oversight a wide range of folks previously free of those rights and obligations. The FCC isn’t sure that that’s necessarily a good idea, so it has also requested comments on the extent to which Internet-based programming distributors could or should be exempted from regulatory constraints.
Redefinition of MVPD could also affect program suppliers and cable/satellite providers who already provide Internet-delivered video services. The NPRM solicits input on those questions as well.
Among other points, in a brief paragraph the Commission notes the interrelation of the Communications Act and the Copyright Act when it comes to the retransmission of copyrighted broadcast programming. Readers will recall the long-running Aereo saga, in which Aereo, an Internet-delivered programming service, initially claimed that it was exempt from copyright obligations to the broadcasters whose programming it retransmitted. The Supreme Court put the kibosh on that claim, largely because, in the Court’s view, the service Aereo was offering looked a lot like cable service (minus, of course, any actual “cable”).
As we reported, following the Court’s ruling Aereo moved to Plan B, which was to claim that the Court had in effect declared it to be a cable system, as a result of which Aereo was entitled to the compulsory copyright license afforded to cable systems by Section 111 of the Copyright Act. That plan was foiled by the Copyright Office, which (also as we reported) told Aereo that Internet retransmissions of broadcast programming “fall outside the scope of the Section 111 license”. To support that conclusion the Office cited not only its own previous holdings, but also the Second Circuit’s 2012 decision in the ivi, Inc. case in which the Court said that Section 111 covers only “localized retransmission services … regulated as cable systems by the FCC”.
But if Section 111’s compulsory license is available to services that the FCC chooses to regulate as cable systems, and the proposed redefinition of MVPD would effectively bring Internet-delivered services like Aereo into the cable fold, then that redefinition could make Aereo’s Plan B a winner – if only Aereo can survive its current bankruptcy proceeding.
The FCC’s proposal is far-reaching and important to anyone involved in the delivery of video programming. As noted above, the NPRM has been published in the Federal Register, so we know that comments are due to be filed by February 17, 2015 and replies are due by March 2. Comments and replies may be filed through the FCC’s ECFS online filing system; refer to Proceeding No.14-261.
Despite extremely harsh assessment of TV Max claims, Commission sticks with its original multi-million dollar fine.
If you’ve been wondering whatever happened to TV Max, wonder no more. As you may recall from our post here last summer, TV Max is the MVPD in the Houston area that – in the FCC’s view – broke the television carriage rules by retransmitting over-the-air stations without getting their permission to do so. If that doesn’t ring a bell, how about $2.25 million, which is the amount of the fine the Commission proposed to dump on TV Max in a Notice of Apparent Liability for Forfeiture and Order (NAL).
As is customary, TV Max was given an opportunity to plead its case in response to the NAL, or at least argue that the forfeiture amount should be reduced. It did so, and after giving TV Max’s the usual compassionate consideration you might expect, the Commission has now reaffirmed the $2.25 mil in a harsh Forfeiture Order.
The only real surprise here is that the Commission didn’t hammer TV Max for even more. For at least a couple of reasons.
We won’t sift through all the background here. Our colleague Paul Feldman did a good job of setting the table in his June, 2013 post (which we highly recommend). One thing you need to know to appreciate the Forfeiture Order is that, in the NAL, one important factual question involved when TV Max had supposedly completed installation of certain MATV facilities. Was it March, 2012 (which would be good for TV Max) or July, 2012 (not good for TV Max)? Unfortunately for TV Max, it had advised the Commission that July, 2012 was the correct date, but only after TV Max’s CEO had initially said that March, 2012 was the correct date. According to TV Max (in a July, 2012 statement), the contradiction was the result of an error by TV Max’s counsel. So in the NAL the Commission assumed that July, 2012 was the correct date, which was bad news for TV Max.
But wouldn’t you know, in its response to the NAL in July, 2013, TV Max returned to its original claim that all the necessary gear had been installed by March, 2012. What about TV Max’s July 2012 statement? That, according to TV Max’s latest claim, was the result of (wait for it) another error by TV Max’s counsel!
The Commission wasn’t buying that retread excuse, particularly because it was contradicted by a long list of other TV Max submissions (a list that fills a footnote extending more than half a page). Not surprisingly, the FCC concluded that TV Max’s latest claim was “disingenuous” and intended “to obscure the egregiousness of [TV Max’s] misconduct.” Ouch!
On another front, the Commission routinely allows NAL targets to try to demonstrate that a fine should be reduced because the target doesn’t have the financial ability to pay. It is well-established in such situations that the party pleading poverty has to produce reliable records (like tax returns, financial statements prepared according to generally accepted accounting principles, that kind of thing). TV Max did submit some financial materials. The Commission took a look and described them as a “hodge-podge of financial data . . . calculated to prevent the Commission from drawing any meaningful conclusions regarding TV Max’s inability to pay claim”. Double ouch!
There are more nuggets in the Forfeiture Order, but you get the idea. It seems like TV Max was doing everything it could to prompt the FCC to up the fine well beyond $2.25 million.
The Commission, however, declined to take the bait – it mercifully stuck with the already prodigious $2.25 million. And in another unexpected display of charity, the Commission addressed the Forfeiture Order only to the business entities related to TV Max, and not to their individual principals. The NAL had indicated that the individuals would be on the hook for the fine, but the Forfeiture Order takes that off the table, at least for now. (A footnote does leave open the possibility of personal liability somewhere down the line, though.)
Whether the case will stop here or continue on into some court remains to be seen. But, as our earlier post noted, it’s hard to imagine that this matter is likely to end well for TV Max.
Update: Effective Date, Appeal/Recon Deadlines Set for New Restrictions on Retrans Consent Negotiations
Last month we reported on the Commission’s decision to prohibit joint retransmission consent negotiations between two non-commonly owned “Top Four” stations in the same market. The Report and Order component of that decision has now been published in the Federal Register. That establishes the effective date for the prohibition: June 18, 2014. Any TV licensees preferring some kind of joint retrans negotiations should thus be sure to wrap them up before then – but it’s probably best not to get your hopes up on that score, since the folks on the other side of the table will also be aware of the approaching effective date and may therefore not be especially motivated to close a deal before then.
The Federal Register publication also starts the countdown for (1) petitions for reconsideration asking the Commission to re-think things and (2) petitions for review asking a Federal appeals court to reverse the Commission. Recon petitions are due at the Commission no later than June 18, 2014. Petitions for review are due by July 18.
Note that this is the type of agency decision that may be appealed to most any Circuit – that means, in turn, that it’s at least possible that we may all be taking another trip to the Judicial Panel on Multidistrict Litigation (JPML). The Commission ended up there back in 2011, when multiple appellants took the FCC’s first net neutrality decision to court. It’s not clear whether anyone contemplating an appeal of the retrans consent negotiation limits may believe that one circuit is preferable to any other, so we won’t know for some time whether there’s going to be a judicial lottery to pick a circuit this time around. If you’re contemplating an appeal and you do happen to have a preferred circuit, you may want to brush up on what you’ll have to do to insure that your circuit of choice makes it into the drum from which the lucky circuit will be drawn (assuming, of course, that multiple petitions are filed with different circuits). The FCC has issued a handy notice on the steps to take.
Last week we reported on the FCC’s Report and Order and Further Notice of Proposed Rulemaking, the “proposed rulemaking” component of which sought comments on the possible elimination of the Commission’s existing network non-duplication and syndicated exclusivity rules. (Those rules allow broadcasters to ask the Commission to enforce exclusivity rights granted in network affiliation or syndication agreements. While not themselves establishing such rights, the FCC’s rules do set out the maximum areas in which such rights may be granted, and provide a framework through which broadcasters can enforce those rights to prohibit MVPDs from importing distant signals.) The Further Notice of Proposed Rulemaking has now been published in the Federal Register, so we now know the deadlines for comments on the proposal. Comments may be filed by May 12, 2014 and replies by June 9. Comments may be uploaded at the FCC’s ECFS filing site; the relevant “Proceeding Number” is 10-71.
Commission prohibits same-market Top Four stations from joining forces in any way in striking retransmission consent deals.
It’s official. After several weeks of grim anticipation (marked by, among other things, an unusual, ominous public notice from the Media Bureau), the Commission has significantly altered the playing field for television broadcasters. In two separate items, the FCC has (a) changed its approach to ownership attribution of joint sales agreements (JSAs) and (b) barred non-commonly-owned Top Four ranked stations in a given market from engaging in joint retransmission consent negotiations. The following is an analysis of the retrans consent decision; we’ll follow up with a review of the JSA order when it is released by the Commission.
The short version: when the FCC’s Report and Order and Further Notice of Proposed Rulemaking (Retrans R&O) takes effect, joint retransmission consent negotiations between two non-commonly owned “Top Four” stations in the same market will be prohibited. And before you get any ideas, the term “joint negotiations” as the FCC uses it is extraordinarily broad, as we will discuss below.
The back story on retransmission consent is well known. For the last 20 years TV stations have been able to elect cable and satellite coverage either by “must carry” or “retransmission consent”. When a broadcaster opts for the latter, it is required by statute to negotiate in “good faith” with cable and satellite providers (collectively, MVPDs). The Commission has the statutory authority to enforce this good faith negotiation requirement, but historically it has identified only a small handful of relatively obvious indicia of a lack of good faith – e.g., refusing to negotiate at all, or failing to respond to the other party’s offer.
The Retrans R&O adds one more indicium.
It is now a per se violation of the good faith negotiation requirement for two non-commonly-owned Top Four TV stations in the same market to coordinate their retransmission consent negotiations. (A “Top Four” station is defined in the same manner as in the Commission’s multiple ownership rules: a station “ranked among the top four stations in a DMA, based on the most recent all-day (9 a.m.-midnight) audience share, as measured by Nielsen Media Research or by any comparable professional, accepted audience ratings service”. Note that network affiliation is not a factor in the definition of a “Top Four” station for these purposes.)
According to the Commission, Top Four stations in a local market are at least partial substitutes for each other, so coordinated negotiation among such stations raises retransmission rates above what the market would otherwise produce. Interestingly, the Commission makes clear that it is not relying on any increase in prices paid by consumers to their MVPDs, but rather only on an increase in the prices paid by those MVPDs to broadcasters. The Commission figures that joint negotiation by Top Four stations leads to higher prices paid by MVPDs due to (a) diminished competition between broadcast stations and (b) the ability of broadcasters acting in concert to extract higher rates by threatening to remove two Top Four stations from an MVPD at the same time.
What constitutes “joint negotiation”? Obviously, if two stations have a written agreement providing for coordinated retrans consent negotiations, that would be prohibited “joint negotiation”. But the prohibition also extends to other, less formal, activities. One Top Four station can’t informally delegate authority to another in the same market to negotiate on its behalf. Nor can two Top Four stations in a given market each delegate negotiation authority to a common third party. (Lawyers in particular should note that this appears to preclude an individual attorney – and probably even a single law firm – from representing two same-market Top Four station in retransmission consent deals.) In fact, any conduct at all that signals collusion is prohibited – so any arrangement by which two same-market Top Four stations might share terms or prices is verboten unless required or authorized by the Commission or a court.
The Retrans R&O does not address joint negotiations between a Top Four and a non-Top Four station, although the Commission remains open to lowering the boom there, too, if it receives evidence suggesting that such action is warranted. Also left unanswered for now: how changes in a station’s rating position might affect the station’s ability to coordinate carriage negotiations with another station in the market. For example, if joint negotiations are begun by a Number Two station and a Number Five station, will those negotiations need to stop if the Number Five station moves up to Top Four status before a deal is reached? Alternatively, if a Top Four station falls out of that status when its retransmission consent deal is expiring, may it then negotiate together with a remaining Top Four station?
Curiously (or not, depending on how you happen to view the Commission’s attitude toward broadcasting generally), the Commission did not feel the need to impose any reciprocal prohibition on MVPDs to prevent them from colluding in their negotiations with broadcasters. While the FCC conceded that in some circumstances, such joint negotiation could violate the good faith requirement under a “totality of the circumstances” test, it concluded that there was insufficient evidence that MVPDs in fact engage in widespread joint negotiations with broadcasters.
The prohibition against joint negotiation will take effect immediately after the effective date of the Retrans R&O, regardless of any terms included in any pre-existing agreements between broadcasters allowing or requiring such negotiations. (The effective date of the Retrans R&O has not yet been set. Check back here for updates.) Existing retransmission consent agreements entered into as a result of joint negotiation will not be disturbed, but no new agreements based on joint negotiations will be allowed, even if negotiations have already begun.
Joint negotiations would probably also be ill-advised even if an MVPD wants to negotiate in that manner. The new rules don’t provide any exemption for MVPD consent. As a result, it’s at least conceivable that an MVPD initially willing to participate in joint negotiation might change its mind before the completion of negotiation, in which case it could file a complaint at that time. In that situation, the joint negotiation might be considered a per se violation of the rules notwithstanding the MVPDs willing participation at the outset.
The Retrans R&O also includes a separate Further Notice of Proposed Rulemaking (FNPRM) portion in which the Commission requests comment on the possible elimination of the Commission’s existing network non-duplication and syndicated exclusivity rules. Those rules allow broadcasters to ask the Commission to enforce exclusivity rights granted in network affiliation or syndication agreements. While not themselves establishing such rights, the FCC’s rules do set out the maximum areas in which such rights may be granted, and provide a framework through which broadcasters can enforce those rights to prohibit MVPDs from importing distant signals.
The Commission tentatively concludes that it has the authority to repeal the network nonduplication and syndicated exclusivity rules, but it nonetheless requests comment on that conclusion. It also requests comment on a broad range of issues related to these rules, including:
- whether the rules remain necessary, including specifically on what effect their repeal would have on local broadcasters, MVPDs, and viewers;
- whether broadcasters would be able to enforce, and potentially expand, exclusivity rights as a contractual matter even if the Commission’s rules were repealed;
- what impact repeal of the rules would have on retransmission consent negotiations; and
- what impact repeal of the rules would have on existing agreements (for example, the many affiliation and syndication agreements that defined the scope of protection by specific reference to the rules).
Whether the Commission ultimately modifies the exclusivity rules is still very much up in the air. Any parties with strong opinions on the matter should be sure to let the Commission know. The deadlines for comments and replies in response to the FNPRM have not yet been announced. (Again, check back here for updates.)
Regardless of what happens with exclusivity rules, though, absent a court challenge, the issue of joint retransmission consent negotiations between same market Top Four stations has now been decided. Any broadcasters who have previously engaged in such negotiations, or have agreements to do so, should begin to consider alternative plans, particularly if they have retransmission consent deals expiring soon.
No consent for retransmission of TV signals? That’ll be $2.25 million, please.
If you’ve ever wondered what would happen if you retransmitted the programming of TV stations without their consent, and then dissembled about it to the FCC, listen up. If you go that route, you could be looking at a fine north of $2,000,000. That’s right – two MILLION dollars plus.
Do we have your attention?
We know about the likely penalty thanks to a Notice of Apparent Liability For Forfeiture and Order (Order) – directed to TV Max, Inc. and its affiliates and its individual controlling principals – for violating Section 325(b) of the Communications Act and Section 76.64 of the Commission’s rules. Those sections lay out the general retransmission consent rules governing multichannel video programming distributor (MVPD) carriage of over-the-air TV signals other than through the “must-carry” process. According to the Order, TV Max retransmitted the signals of six broadcast stations without obtaining their consent. For doing so, TV Max is looking at a proposed fine of $2,250,000. Since the Commission has penalized MVPD’s for retransmission consent violations only a couple of times in the past – and then only in the low five-figure range of $15,000 (reduced from a maximum potential of $250,000 or so) – we can probably assume that TV Max really ticked off the FCC.
In fact, the Order provides a model for how to infuriate the Commission. [Practice tip: We strongly recommend that MVPDs avoid this model.]
First, some background.
Under the must-carry/retrans consent system established by Congress a couple of decades ago, every three years TV stations elect how they will make their signals available to MVPD’s for retransmission. The two choices: either (a) require the MVPD to negotiate to obtain the station’s consent or (b) elect must-carry, which allows the MVPD to carry the TV signal. If a station elects retransmission consent, the MVPD may not (with at least one very narrow exception discussed below) carry the station’s signal without the express consent of the station.
TV Max is an MVPD in the Houston area, providing service to approximately 10,000 subscribers in 245 apartment/condo buildings. It carried the signals of six Houston stations which had all elected retransmission consent. It had retrans consent agreements with the six stations, but those agreements had all expired by March, 2012; the carriage continued well beyond that date.
The TV stations complained to TV Max, and then to the Commission starting in April, 2012. In response, TV Max had a story. It claimed that it was subject to the Master Antenna TV (MATV) exception to the rules. Under that exception, the owners of a multi-unit apartment or condo building can put up a master antenna for their building and provide carriage of OTA TV signals to the building’s units without the stations’ consent, as long as: (a) the OTA signals are in fact received by the MATV facilities; (b) those signals are made available at the viewers’ option and without charge to the viewers; and (c) the MATV antenna and facilities are under the ownership and control of a building owner or the viewers in that building.
So TV Max wrapped itself in the MATV exception, claiming that the signals were being delivered to the viewers through MATV facilities on each building.
There was one big problem with that claim. It apparently wasn’t true.
According to the Commission, by the time TV Max’s previous retrans consent agreements had expired, only some of its buildings actually had MATV equipment installed. And even after it had supposedly completed installation of such gear on all its buildings (by late July, 2012), TV Max was still not providing the OTA stations’ programming to all buildings through those MATV systems. (It was apparently using a metropolitan-wide optical fiber system, or “fiber ring”, rather than in-building, coaxial-based MATV systems.) By December, 2012, the Media Bureau had investigated the matter – even convening a “lengthy conference call” with all the parties – and had concluded that TV Max was violating the retrans consent rules. It so notified TV Max.
Nevertheless, TV Max apparently continued its carriage of the stations’ programming. But, in answer to follow-up inquiries from the Bureau in April, 2013, it told the Bureau that since June, 2012, the stations’ signals “ha[d] not been carried on any fiber ring owned or controlled by TV Max.” This claim was apparently based on the fact that sometime in mid-2012, TV Max had sold “certain” of its assets – including head-end and “cable TV subscriber assets” – to a couple of other companies. TV Max seemed to be saying that any carriage after mid-2012 had not been its fault.
What TV Max didn’t mention to the Commission was the fact that, according to readily available public records, the companies that acquired those assets are apparently controlled by some or all of the same folks who control TV Max, a fact which plainly undermined the credibility of TV Max’s seeming profession of innocence.
The Commission unsurprisingly concluded that “it appears that TV Max simply assigned the cable operation and fiber optic network to two related companies in an effort to evade responsibility for its ongoing violations.” In the Commission’s view, TV Max’s April, 2013 response was “lacking in candor”. And, of course, TV Max’s historic and on-going unauthorized carriage of the OTA signals violated the rules.
In calculating the forfeiture to be meted out, the Commission noted that TV Max was guilty of “egregious misconduct” featuring repeated, intentional violations the resulted in “substantial economic gain”. So while the standard rate-card fine for retrans violations is $7,500 per violation (up to $37,500 per day), the FCC felt it needed to send a message to TV Max (and anybody else who might be inclined to follow TV Max’s game plan). Using some unstated math, the Commission came up with a total fine of $2,250,000. According to the Commission, it could have come down even heavier on TV Max, but concluded that, because of TV Max’s relatively small size, that wouldn’t be necessary. Essentially, the final amount was designed to deter future similar violations and ensure that the forfeiture is not considered an affordable cost of doing business. (The Commission did, however, observe that even higher upward adjustments might be “quite appropriate in other cases”.)
Over and above its sheer size, there is at least one additional interesting aspect of the proposed fine. While the Order doesn’t dwell on this, it makes strikingly clear that the forfeiture is being imposed not only on TV Max, but also – jointly and severally – on TV Max’s individual principals and related entities. As we have previously observed here, the imposition of monetary penalties on the individual principals of corporate wrong-doers seems inconsistent with the usual concept of “corporation”. If nothing else, the TV Max case reflects the FCC’s willingness to ignore the corporate veil.
TV Max still has the opportunity both to argue to the FCC that the forfeiture should be reduced and to fight the entire case anew in court. It’s hard to imagine, though, that this matter is likely to end well for TV Max.
No MVPD likes to pay retransmission consent fees. But the TV Max case provides a cautionary tale of how an MVPD should not deal with that concern.
New action follows December roll-out to eastern states.
TV “white space” devices, which operate on an unlicensed basis in locally vacant TV spectrum, are now authorized nationwide. This is pretty fast, by Government standards; just last December the FCC okayed the first large-scale roll-out to seven eastern states plus Washington, D.C. The class of approved coordinators for the database these devices rely on to find open channels is growing much more slowly. Also growing slowly is the number of FCC-approved devices that can use the service; we count just five so far.
New systems must protect many other services from interference.
Fully four years after adopting rules for unlicensed TV Band Devices (TVBDs), also called “white space” systems, the FCC has authorized roll-out beyond the two small test areas previously approved. Touted by advocates as “Wi-Fi on steroids,” TVBDs can now boot up in New York, New Jersey, Pennsylvania, Delaware, Maryland, Washington DC, Virginia, and North Carolina.
The FCC expects to extend authorization nationwide by mid-January.
TVBDs are required to avoid causing interference to multiple services: broadcast TV; fixed broadcast auxiliary service links; receive sites for TV translators, low power TVs, Class A TVs, and multichannel video programming distributors; public safety and private land mobile; offshore radio telephone; radio astronomy; and “low power auxiliary service,” which includes licensed (and some unlicensed) wireless microphones.
The complexity of the TVBD rules results from the need to ensure that all of these services can operate unharmed. In many metropolitan areas having multiple TV channels and heavy use of wireless microphones, vacant spectrum for TVBDs is already scarce. The FCC’s ongoing plans to consolidate TV broadcasters onto fewer channels, so as to free up more spectrum for wireless use, will only make things worse.
Simultaneously with the spread of TVBDs into the Middle Atlantic states, the FCC expanded its registration program for wireless microphones from those same states out to the rest of the country, keeping the wireless mic registrations a step ahead of the TVBD roll-out.
Registration is needed to protect qualifying events from interference caused by TV Band Devices
The FCC has expanded its registration program for wireless microphones from the Middle Atlantic states to the rest of the country. Registration helps to protect qualifying wireless microphones that operate in vacant TV channels from interference caused by TV Band Devices (TVBDs), also called “white space” systems, that likewise use vacant TV slots.
When the FCC established rules for TVBDs, it required those devices to avoid interfering not only with TV stations, but also with several other categories of equipment operating on TV frequencies. The most populous of those, by far, are the wireless microphones that are ubiquitous in TV, stage, and film production.
Most wireless microphones used in TV and films are licensed by the FCC. Most others – including those used in stage shows, churches, and the FCC meeting room – operated illegally until January 2010, when the FCC authorized low-power models on an unlicensed basis by waiver. (As it considers whether to make those rules permanent, the FCC recently sought to update the record on wireless microphone issues generally.)
Two TV channels in every market are closed to TVBDs, so as to leave room for wireless microphones. Licensed wireless microphones needing additional channels are entitled to interference protection from TVBDs. So are unlicensed microphones on other channels, but only if used for major sporting events, live theatrical productions and shows, and similar occasions that require more microphones than the set-aside channels can accommodate.
To implement protection, qualified events must register in the database that controls which frequencies TVBDs can use at each location. The FCC has authorized the operation of TVBDs in New York, New Jersey, Pennsylvania, Delaware, Maryland, Washington DC, Virginia, and North Carolina, and expects nationwide authorization by mid-January. Those who distribute or use wireless microphones should make sure any needed registrations are in place before TVBDs are deployed in their vicinity.
The details of the registration process are available here. The conditions and procedures are complex; and the FCC cautions that most uses of unlicensed wireless microphone do not qualify for registration. We recommend planning ahead.
Last month we reported on an FCC action that may mark the end of the decade-long “white space” proceeding authorizing the operation of some unlicensed devices in the broadcast television bands. The Commission’s Third Memorandum Opinion and Order (3rd MO&O), released in early April, disposed of a handful of petitions for reconsideration of the agency’s 2010 decision which had in turn tweaked technical “white space” specs adopted back in 2008. The 3rd MO&O has now been published in the Federal Register, which means that, barring any extraordinary intervening event (like the issuance of a stay – the approximate likelihood of which is pretty much zero), the rules as modified last month will take effect on June 18, 2012.
Tempus fugit! Time for the next five-year assessment of the ban on certain exclusive program access deals – Comments are due by June 22, 2012.
Hard to believe, but it’s that time again – time for the Commission to take a look at competition in the multichannel video programming distribution (MVPD) industry to determine whether the 20-year-old ban on certain exclusive program access deals is still necessary. With the release of a Notice of Proposed Rulemaking (NPRM), the Commission has started that ball rolling again. Interested parties have until June 22 to let the FCC know their thoughts on the issue.
The last two times the Commission considered this question, it concluded that the ban should remain in place. Thanks to at least one intervening court decision, though, this time could be different.
Back in 1992, Congress was concerned about the choke-hold that the largely monopolistic cable industry then had on video delivery in many markets. Congress understood from the FCC that that choke-hold was at least partly the result of the fact that competitors couldn’t secure programming owned by “vertically integrated cable companies”. (In this context, “vertically integrated cable companies” are cable operators that own attributable interests in companies that provide cable programming.) So Congress just said “no”.
It ordered the Commission (among other things) to prohibit certain exclusivity agreements between a cable operator and a cable program provider in which the operator has an attributable interest. The idea was to assure that all competing cable operators would have access to the primo types of programs most attractive to subscribers.
Congress was aware that the video delivery industry was developing rapidly and that the need for the ban might decline over time. So Congress included a sunset provision: while the 1992 Cable Act required the imposition of the ban, it also required that the FCC revisit the ban in 2002 after the enactment of the Cable Act. Unless the FCC were then to determine that the ban continued to be necessary to protect competition and diversity, the ban would automatically expire. And even if the ban survived the 2002 review, it would be subject to similar reviews every five years thereafter.
The ban did indeed survive the 2002 review, and the 2007 review as well. But the latter decision was appealed to the U.S. Court of Appeals for the D.C. Circuit in 2010. While the court affirmed the FCC’s decision to leave the ban in place for another five years, the court expressed concern because (a) Congress had clearly intended that the ban go away at some point and (b) the video delivery market has “changed drastically” since 1992. One of the three judges issued a dissenting opinion buying into the appellants’ argument that the ban raised serious First Amendment concerns.
Against that backdrop comes the NPRM.
This time around the Commission appears to be taking to heart the messages from the Court of Appeals. In contemplation of a possible sunsetting, the Commission is seeking suggestions for how best it could preserve competition and diversity if the ban were finally to be tossed.
And to those who would urge that the ban be kept in place – at least for another five years – the Commission cautions that it will be looking for specific data and empirical analyses showing that lifting the ban would harm competition. In the past, the ban’s supporters have tended to rely on generalized claims that certain programming controlled by cable-affiliated entities is “must have” and should not be subject to access exclusivity deals. It appears from the NPRM that that won’t cut it anymore.
As a preliminary observation, the Commission notes that, since 2007, there have been at least three developments that might affect the questions at issue:
The separation of Time Warner Cable Inc. (TWC), a cable operator, from Time Warner Inc. (Time Warner), an owner of satellite-delivered, national programming networks. As a result of the separation, Time Warner’s programming networks are no longer affiliated with TWC, thus reducing the number of satellite-delivered, national programming networks that are cable-affiliated. This is significant because the FCC has historically compared the total number of satellite-delivered channels with the number of those channels affiliated with a cable operator. The actual significance of that comparative approach is not entirely clear.
The joint venture between Comcast (a vertically integrated cable operator) and NBC Universal, Inc. (NBCU), an owner of broadcast stations and satellite-delivered, national programming networks). While this transaction led to an increase in satellite-delivered, national programming networks that are cable-affiliated, the NPRM suggests that the program access conditions of the merger agreement mitigate any adverse effects this deal might have on the video distribution market. (Of course, those merger conditions are in any event set to go away at the end of 2018, and they might be removed or revised earlier than that – so their permanent protective effect are neither as extensive nor as solid as a more general rule or policy applicable to all parties.)
The rapid growth of distributing and viewing of video programming over the Internet (OVD, or online video distribution). In assessing the Comcast/NBCU merger, the Commission acknowledged the potential effect of OVDs on programming choices, viewer flexibility, technological innovation and lower prices. In the Comcast/NBCU Merger Order, the Commission recognized that OVDs “can provide and promote more programming choices, viewing flexibility, technological innovation and lower prices.” According to the Commission, OVDs are a “potential competitive threat” that “must have a similar array of programming” if they are to “fully compete”. The NPRM solicits information regarding the effect – historical or anticipated – of OVDs on nationwide and regional multichannel video distribution subscription rates. It also asks whether (and if so, how) the emergence of OVDs that could benefit from the exclusive contract prohibition should affect the Commission’s analysis. (It’s interesting that the FCC may be looking at OVDs as a potential beneficiary of, rather than a reason for sunsetting, the exclusive contract prohibition.)
In view of all these factors, the NPRM asks whether it should: (a) sunset the ban on exclusive contracts involving satellite-delivered, cable-affiliated programming; (b) retain that ban as is, or (c) retain it with some relaxation. It also solicits comments on revisions to the program access rules that might allow it to address alleged violations (e.g., discriminatory volume discounts and uniform prices increases) more effectively.
Anyone looking for continuation of the prohibition – a universe likely to include non-vertically integrated MVPDs – will be expected to demonstrate, with hard data, either that (a) little has changed in the competitive dynamics of the video market since 2007, or (b) as a result of (or in spite of) changes, relaxing or sunsetting the prohibition would harm competition. Among the issues the FCC has teed up are the following:
What is the impact of the allegedly growing number of satellite-delivered national programming networks? According to the NPRM, the percentage of such networks that are cable-affiliated has significantly declined. One difficult issue here is how to count programming. For example, should a network that provides its programming in standard definition, high definition, 3-D and video-on-demand formats be treated as four networks or one? (While non-integrated MVPDs might be inclined to argue in this context that a multi-format network like this should really count as only one network, they argued otherwise in 2010 to get the Commission to force regional sports networks (RSNs) to provide access to HD feeds as well as SD feeds.)
Do integrated MVPD/programmers still have the ability to withhold programming from competitors in a manner that harms competition? The NPRM appears to recognize the continued existence of some popular channels for which there are no current substitutes. The ability to withhold such “must have” channels has generally been viewed as anti-competitive. But the Commission is now looking for “reliable, empirical data” to establish conclusively the existence of such channels. While the notion of “must have” channels may seem obvious – even the Commission seems to acknowledge that RSNs are critical to a competitive MVPD service – proving their existence with facts and figures could be a difficult and expensive proposition.
Do integrated MVPD/programmers still have the incentive to withhold programming from competitors in a manner that harms competition? The historical theory has been that integrated companies are willing to forgo revenue from licensing programming to competitors because such integrated companies can profit more from increased revenues derived from subscribers who flock to the integrated MVPD to get the programming that’s unavailable from its competitors. The NPRM suggests that the decline in national penetration rate for cable operators (67% to 58.5%) may undermine that theory. Of course, presumably the integrated cable operators have lost subscribers to the very competitors to whom they already must make their programming available – so it’s not clear why a declining penetration rate might justify elimination of ban on exclusivity deals, but that’s a point that will presumably be made by commenters.
If, after reviewing all the comments and other record information, the Commission concludes that the prohibition on exclusive programming contracts should be tossed, the Commission will have to decide how, in the absence of the prohibition, it can and should protect and preserve competition. The FCC invites comments on a range of possible approaches, including:
Complete elimination of the prohibition, replaced by reliance other existing protections. The Commission has complaint processes in place with respect to a variety of programming-related issues on the MVPD front. So even if the absolute ban on exclusive access deals were to be eliminated, aggrieved parties could theoretically still plead their case to the Commission through complaints. But the complainant would have the burden of proof. That would require the complainant to demonstrate the integrated MVPD had engaged in some “unfair act” the “purpose or effect” of which was to “significantly hinder or prevent” the complainant from providing programming to its subscribers. That’s a tough burden to meet, although the NPRM invites suggestions for easing that burden with respect to RSN, and possibly other, programming (through, perhaps, the establishment of rebuttable presumptions regarding the intent and effect of denying such programming to competitors).
Gradual elimination of the prohibition market-by-market. Under this approach, the prohibition would be left in place, but cable operators or satellite-delivered, cable-affiliated programmers would be permitted to file a Petition for Sunset seeking to remove the prohibition on a market-by-market basis based on the extent of competition in the market.
Retention of a more limited prohibition. If any problem arising from the kind of program exclusivity deals barred by the current prohibition is really limited to certain types of programming, the Commission is open to considering narrowing the scope of the prohibition to reach only RSNs and certain other so-called “must-have” programming. Again, however, hard data is sought as to the alleged “must-have” nature of protected programming.
Finally, the Commission notes that elimination of the prohibition could cause substantial disruptions to cable subscribers. For example, some programming agreements entered into while the prohibition has been in effect might provide that, should the prohibition be eliminated, the cable-affiliated programmer could immediately terminate the agreement and instead enter into an exclusive arrangement with its cable affiliate. If such a provision were invoked, subscribers to non-affiliated MVPDs might suddenly lose access to desirable programming. What steps, if any, should the Commission take to minimize viewer disruptions if the prohibition is eliminated?
The NPRM is a wide-ranging invitation for comments on a host of issues, both general and detailed. It is dense with assertions and questions that demand considerable review and deliberation. Since the bottom line here is the possible elimination of a rule that has been in place for 20 years already, everyone affected by that rule should consider how they may be able to influence the final outcome here.
The NPRM has been published in the Federal Register, which establishes the deadlines for comments and reply comments. Comments are due by June 22, 2012; replies are due by July 23.
Minor changes may signal an end to almost a decade of rulemaking.
The FCC has released yet another decision in its long-running effort to implement rules allowing unlicensed “white space” devices in the television bands. The latest revision does not represent any wholesale changes, but will make it easier for some devices to operate.
White space devices (TV Band Devices or TVBDs, in the FCC’s nomenclature) rely on the fact that every location has some TV spectrum not being used. Those vacant frequencies typically show up as white spaces on a map of spectrum occupancy – hence the name. Technical studies show that properly controlled unlicensed devices can use these channels without causing interference to TV operation and other authorized users, including wireless microphones.
Following a Notice of Inquiry late in 2002, and a 2004 Notice of Proposed Rulemaking, the FCC first adopted rules allowing white space devices in 2006, but left the technical specifics for a later date. Those came in 2008, and then in 2010 the FCC responded to petitions for reconsideration with a number of revisions. Now the FCC has addressed petitions for reconsideration of the 2010 order.
The rules categorize each white space device as either fixed or mobile. A fixed device must have its location either professionally programmed in or determined by an on-board GPS device, and is subject to limits on operating power, antenna height, and antenna gain limits. Before operating, it must query a database of available spectrum for its location. A mobile device may similarly use GPS to determine its location and then query a database (Mode II devices); alternatively, it can contact another white space device that will in turn query the database (Mode I devices). The FCC has so far approved ten private companies to administer the databases, of which two have completed testing to the FCC’s satisfaction.
In its recent order disposing of the petitions for reconsiderations, the Commission provided the following changes and clarifications:
Antenna Height. The 2010 rules limited fixed device antenna heights to a maximum of 30 meters above ground, and the height above the average terrain (HAAT) to no more than 76 meters. Several parties requested reconsideration of this restriction, particularly the HAAT portion. (According to one, the majority of the state of West Virginia would have been off-limits.) The FCC now allows fixed white space devices to have antennas up to 250 meters above average terrain, although still no more than 30 meters above ground level. At the same time, the FCC revised the separation distances between fixed white space devices and television contours to allow for the greater HAAT, but left unchanged the separations for wireless microphones and the exclusion zones around MVPD, LPTV, and BAS receive sites. A device that provides database information to Mode I portable devices must comply with the previous HAAT limitations, so as to keep the Mode I device from straying too far from a known location.
Out-of-Band Emissions: The 2010 rules limited out-of-band emissions to 72.8 dB below the device’s highest in-band emissions. Now the out-of-band emissions are relaxed to 72.8 dB below the maximum power allowed within the 6 MHz bandwidth. The new order also cuts back the required occupied bandwidth from 6 MHz to 5.5 MHz, so as to ease the roll-off at the channel edges, and slightly increases the allowable power spectral density so as to leave total power unchanged.
Channel 52 Protection: As part of the transition to digital television, the FCC auctioned former TV channels 52 and above for wireless use. The wireless companies have long sought restrictions on channel 51 TV operation to protect their frequencies just above, and similarly requested limits on white space devices on channel 51. The FCC refused, partly on procedural grounds, and partly on the principle that white space devices, being unlicensed, are already required to protect licensed wireless operations.
Classes of Devices: The FCC rejected a new class of white space device, similar to “Mode II” but for indoor use only, without GPS capabilities. The FCC feared these could be easily moved without updating their locations, thus creating interference. It also found the new class to be largely unnecessary, as Mode I portable devices may operate without geolocation (although they must query a Mode II or fixed device periodically).
Confidentiality of Database Information: The FCC makes publicly available all information required to be included in the databases that white spaces devices must search before operating. A cable association asked the FCC to withhold certain data, including coordinates of cable headends and towers, claiming this type of equipment was “critical infrastructure” that could be subject to terrorist attack. The FCC disagreed with the premise and refused the rule change.
Finally, the FCC clarified two points. It emphasized that LPTV, television translator, and Class A television stations will have their receive sites protected based on the coordinates available in the existing CDBS database. The FCC will create a new web interface so that broadcasters can update the information. Second, the recent order corrects the coordinates of certain radio astronomy sites, which must be included in white spaces databases and protected by white spaces devices.
Most of the rule changes will take effect 30 days after publication in the Federal Register. Revisions to the filing of receive site information and entry of other information into the white spaces databases require OMB sign-off, and will probably take a few months longer. Check back here for updates.
So far all of these rules control only a limited deployment in Wilmington, NC. But with the rules approaching final form, and more databases coming on line, white space devices may finally take the big step from PowerPoint to reality.
Three weeks ago we reported on the release of a Notice of Proposed Rulemaking (NPRM) addressing the thorny issue of retransmission consent. With the publication of the NPRM in the Federal Register, the deadlines for comments and reply comments have now been set. Comments are due by May 27, 2011; reply comments are due by June 27, 2011. Additionally, if you would like to comment on the “information collection” aspects of the Commission’s proposals (in connection with the Paperwork Reduction Act), you have until May 27, 2011. Check out the Federal Register notice for details.
FCC proposes modest – but possibly significant – changes to rules regulating MVPD/broadcaster retransmission consent negotiations
The long-awaited Notice of Proposed Rulemaking (NPRM) addressing the thorny issue of retransmission consent has been released. When it comes to the ebb and flow of the on-going debate about the retrans system, some had hoped that the Commission might jump into the deep end while others had hoped that it would stay comfortably high and dry in the lifeguard’s chair – but it looks like the FCC isn’t inclined toward either of those options. Instead, it proposes, in effect, to dip its toe, maybe even roll up its pants to wade in a bit. In other words, even if some change in the retransmission consent negotiation process is possible, the likely scope of the change on the immediate horizon appears limited.
Then again, the Commission has invited comments, so who knows where this may end up?
Retransmission consent is one component of the perennial tug-of-war between television broadcasters and multichannel video program distributors (MVPDs, i.e., cable, satellite systems, and the like) relative to carriage of broadcast programming on MVPD systems. Broadcasters periodically elect either “must carry” or “retransmission consent” status. Must carry status more or less guarantees carriage within the stations’ local markets, but without compensation to the broadcaster for such carriage.
By contrast, retransmission consent allows broadcasters to negotiate for compensation for carriage, the risk being that carriage must cease if the parties can’t come to terms. Occasionally a broadcaster and a cable operator fail to reach an agreement; in that case, the cable operator must cease carriage of the station at issue, which in turn deprives cable subscribers of cable-fed access to the programming (including, in some instances, high profile items like the World Series, football play-offs, special award shows and the like). This typically results in a burst of consumer outrage, a bout of finger pointing between the cable operator and broadcaster, and a round of concerned statements from elected officials and the FCC.
Such disputes have been rare. But last year, after some particularly noisy set-tos, a group of cable operators asked the FCC to devise new rules governing retransmission consent negotiations. The petitioners wanted the Commission to block broadcasters from withdrawing retransmission consent during negotiations and to order binding arbitration in the event negotiations did not produce a result. Broadcasters countered that such requirements would undermine the free market nature of retransmission consent negotiations.
Responding to the petition, the NPRM recognizes that the FCC’s authority to involve itself in retrans negotiations is limited. Since 1999, the Communications Act has required broadcasters to negotiate with MVPDs in good faith – but it gave the Commission only a limited role in determining what “good faith” might involve in this context. Acknowledging that limitation, the FCC in the NPRM rejects as beyond its statutory authority the ideas of imposing either (a) “interim” retransmission consent (providing the MVPD with a right to carry programming despite the broadcaster’s refusal) or (b) mandatory arbitration.
Rather, the FCC focuses on tweaking existing rules that affect how parties to retransmission consent negotiations conduct themselves. Specifically, the FCC’s proposals address possible changes in rules relating to: (1) “strengthening” the “good faith” standard governing negotiations; (2) notice to subscribers; (3) deletion of channels during “sweeps” periods; and (4) syndicated exclusivity and network non-duplication rules.
Good Faith Negotiations. The FCC’s current rules require parties to engage in “good faith” negotiations for retransmission consent. Not surprisingly, then, the FCC’s proposals focus on whether the “good faith” rules might be strengthened by adding to the list of actions that are considered “per se” violations of the rules. For instance, should a station giving its network the right to approve retrans agreements be considered a “per se” violation of the station’s duty to negotiate in good faith? How about a station appointing another licensee (pursuant, say, to a JSA or LMA) to negotiate the retrans terms? Should one party’s refusal to agree to non-binding mediation in the event of a negotiation impasse be deemed a “per se” violation? The NPRM seeks comment on a range of conduct which might be deemed “per se” violations of the good faith requirement.
Notice to Subscribers. Noting that adequate warnings of impending retransmission consent disputes might help consumers prepare for disruptions, the NPRM looks at the Commission’s rules governing notices to subscribers. The rules currently require that cable operators give their subscribers 30 days prior notice before deleting channels or changing channel lineups. But the uncertainty produced by retransmission consent negotiations makes it difficult for cable operators to know 30 days in advance whether or not a particular broadcast channel is going to be deleted. Accordingly, the NPRM questions whether the rules should be amended to require notice of potential deletions in advance of retransmission consent negotiations and whether the notice requirements should extend to broadcasters, as well.
“Sweeps” Prohibition. Cable operators – but not other MVPDs (i.e., satellite providers) – are prohibited from deleting or repositioning channels during “sweeps” periods (i.e., when rating companies conduct audience measurements and, consequently, the networks roll out all the good episodes of your favorite shows). That could affect retrans negotiations, since the disparity accords non-cable MVPDs some greater freedom than their cable compatriots. The Commission questions whether it would be appropriate to put all MVPDs on an equal footing by extending the “sweeps” prohibition to non-cable MVPDs. The NPRM also raises the possibility of imposing a corresponding prohibition on broadcasters. On that point the Commission tentatively concludes that it doesn’t have the authority to do so; nevertheless, the FCC invites comment on whether or not it does have the authority.
Syndex/Network Non-dupe. Finally, and perhaps most significantly, the NPRM seeks comment on the possible elimination of the current rules governing syndicated programming exclusivity and network non-duplication. These rules generally protect the contractual rights of broadcasters in their programming by requiring cable and satellite operators to black out programming on other channels that duplicate programming for which a broadcaster holds exclusive rights. Since the exclusive programming rights they hold provide much of the broadcasters’ leverage in retransmission consent negotiations, changes to the FCC rules relating to those rights could affect the dynamics of retransmission consent negotiations. The underlying contractual rights to exclusivity would, of course, remain unchanged. But the elimination of the FCC’s rules would eliminate the FCC as a forum in which the parties’ rights could be adjudicated – meaning that parties would likely have to go to court in the first instance to enforce their rights. Whether that would really be a preferable alternative to either side in a retransmission dispute is far from clear.
Comments in this proceeding will be due 60 days after the NPRM is published in the Federal Register and reply comments will be due 30 days after that. Check back here for updates on that front. As this proceeding is certain to attract a lot of attention from all sides, interested parties should strongly consider making their views known.
Protection of TV STAs overlooked; Potential protection of LPTV, TV translator, cable, etc. OTA-receive sites expanded
Poring over the fine print of the FCC’s “white spaces” decision we wrote about last week, we have found two issues that merit the attention of TV broadcasters.
White spaces devices, of course, will operate on vacant TV channels and will have to protect TV broadcast stations. Each device will consult a database to determine which TV channels can be safely used at the device’s location. Devices may have to change channels as necessary from time to time to afford the required protection.
Since the selection of vacant channels will be a dynamic process, the FCC wants to make sure that only channels actually in use by TV stations are marked as off-limits. So, for example, channels occupied by unbuilt TV construction permits would be available for white spaces devices, since, being unbuilt (and, thus, inoperative), the TV CPs would not be subject to any actual interference. With that in mind, the new rules provide that the white spaces database need recognize only granted or pending license applications for both full and low power TV stations.
Whoops. What about Special Temporary Authorizations (STAs)?
STAs are not a rarity. They are routinely issued to, say, stations that suddenly lose their transmitter sites or that suffer equipment damage during a storm. LPTV stations may well need STAs during the process of transitioning from analog to digital operation – a transition that the FCC is proposing to make mandatory. An STA allows the station to continue to operate – possibly from an alternate site or with facilities other than those specified in its license (or license application) – until it can either (a) return to its authorized site/facilities or (b) obtain permanent authority for its modified site/facilities.
The Commission’s failure to include STAs in the white spaces database appears to be a serious slip. Operation pursuant to an STA is Commission-authorized broadcast operation which should be protected from white spaces devices to the same degree as “licensed” operation. This error seems to us to merit a petition for reconsideration by the TV industry.
The other issue involves TV translators, LPTV stations, cable systems and other multichannel video programming distributors (let’s call them, collectively, “retransmitters”). As might be expected, retransmitters retransmit other stations’ signals, signals which are generally received by the retransmitter over-the-air. If a white spaces device cranks up near the point at which the retransmitter ordinarily picks up the signal, the retransmitter’s ability to effectively operate is threatened.
The Commission recognizes this problem. In the 2008 version of the white spaces rules, the Commission permitted some (but not all) retransmitters to register their over-the-air receive sites in the white spaces database – but only if those sites were (a) within 80 kilometers (50 miles) of the originating station’s service contour but (b) outside that station’s protected contour. Now, however, at the suggestion of a number of parties the Commission has expanded the area in which receive sites may be registered. That expansion, though, is not gotcha free.
Under the newly-announced revisions to the rules, all (not just some) retransmitters with over-the-air receive sites more than 80 kilometers from the edge of the received station’s protected service contour may submit waiver requests seeking to have those receive sites registered. The Commission will then issue a public notice soliciting comments on such waiver requests. After reviewing everything that comes in, the Commission will decide on a case-by-case basis whether or not to include each such site in the database.
Existing operators who may wish to take advantage of this potential registration opportunity should be particularly alert. Starting with the effective date of the new rules, such operators will have 90 days in which to submit their waiver requests. (Retransmitters who commence operations in the future will have 90 days from the date on which they start up.) The Commission has not provided a time frame during which its resolution of such requests can be expected.
The effective date of the new rules has not yet been announced, and won’t occur (at the earliest) until 30 days after the new rules have been published in the Federal Register. Additionally, it seems unlikely that the Commission will invite new registrations (or registration waiver requests) until a number of practical questions relating to the white spaces database have been resolved. For example, who will manage the database, how will registrations and the like be submitted, how will the database be implemented? Obviously, there is still much to be done before white spaces devices are likely be unleashed on us all.
New deadlines: Comments - May 18, Reply Comments - June 3
If you were planning to file comments on the petition proposing overhaul of the retransmission consent process, heads up: less than two weeks after setting the initial comment/reply deadlines, the Media Bureau has extended those deadlines by a month. Comments are now due by May 18, 2010 and reply comments by June 3, 2010. Apparently, when it announced the original deadlines, the Commission failed to notice that the initial comment deadline fell two days after the conclusion of the annual NAB Convention. That factoid did not, however, escape the NAB’s attention. The NAB promptly wrote to the Commission, noting with admirable understatement that the “many concerned parties” who would be attending the show would be handicapped time-wise if the original deadline were not extended. The Bureau was happy to accommodate the NAB in order “to facilitate the development of a full record.”
Comments on proposed retrans overhaul due April 19
Just a week ago we reported here on a petition, submitted to the FCC on March 9, proposing an overhaul of the retransmission consent process. Now the Media Bureau, acting with impressive speed, has issued a Public Notice inviting comments on the petition. The Notice (released March 19) sets April 19, 2010, as the deadline for initial comments and May 4, 2010, as the deadline for reply comments. The Notice is pure boilerplate and provides no indication at all as to how the Bureau (or the Commission) might feel about the idea of comprehensive changes in retrans consent. However, as we noted in our earlier post, two days after the petition was filed, Chairman Genachowski indicated to Congress that this issue “is a subject that should be looked at seriously”. Put that together with the breakneck speed with which the Bureau has reacted to the March 9 petition and you could reasonably conclude that major changes in the retrans process may be coming sooner rather than later. Stay tuned.
Consumer-friendly (?) Big Cable seeks Big Cable-friendly overhaul of retransmission consent process
A group consisting of some of the major multichannel video program distributors (MVPDs) has run to the Commission asking for changes in the retransmission consent rules. The group – for convenience, let’s refer to them collectively as “Big Cable”, although they include (in addition to major cable operators) non-cablers DirecTV, Dish, a couple of phone companies, and even some supposedly independent advocacy/think tank groups – is concerned that Big Cable’s ability to call the shots when it comes to carriage of broadcast signals has gone away, and Big Cable understandably wants it back. Who wouldn’t?
In a Petition for Rulemaking, Big Cable declares that the retransmission consent system is “broken”. Not surprisingly, Big Cable had this particular epiphany immediately after several very public sets of carriage negotiations in which, e.g., Fox and ABC demonstrated their negotiating acumen, and clout, in facing down some very major cable operators. Who “won” or who “lost” those negotiations is, of course, a matter of opinion and spin. But Big Cable is now urging the FCC to impose a mandatory arbitration process and to require that MVPDs continue to carry stations when parties can’t reach a deal.
Sure sounds like Big Cable may be thinking that, nowadays at least, the broadcaster-MVPD negotiation process isn’t exactly what it was cracked up to be . . . at least for Big Cable.
Way back when, in the misty eons of time prior to the Cable Act of 1992, broadcast stations got carried on cable systems pursuant to the “must-carry” rules. In rough terms, the cable systems had to carry local stations, and broadcasters had to allow such carriage. But with the 1992 Act, Congress started to coax the players into a more market-oriented arrangement. In addition to must-carry (which remained in place as an alternative), broadcast carriage could be agreed-to through “retransmission consent” arrangements privately negotiated between TV station and cable operator. The broadcaster had to elect which approach it would take in advance of the relevant three-year term. Those electing retransmission consent (or “retrans”, to the cognoscenti) were then left to cut whatever deal they could.
The advantage to the broadcaster was that, if it could negotiate a favorable deal under retrans, it could get compensation for carriage that, under must-carry, it was giving up for free. The downside, of course, was that a broadcaster electing retrans and then unable to tie down a deal risked losing out on any carriage during the three-year term. Bummer. (All parties to retrans negotiations were, and still are, required to deal in good faith. While accusing the other side of acting in bad faith is a standard ploy, to date such claims have not moved the Commission to interject itself into retrans dealings. Basically, it’s beyond difficult to establish that the other guy is negotiating in bad faith – and in its petition Big Cable pretty much concedes as much.)
In the early rounds, the cable companies held most, if not all, of the cards. Since they were all monopolies in their respective areas, they could avail themselves – usually successfully – of the tried-and-true negotiation position of “my way or the highway”. Broadcasters electing retrans usually ended up getting access to one or more additional cable channels and maybe some advertising avails and the like –whatever scraps the cable company chose to leave on the table – but no cash payments for their programming.
Then a funny thing happened over the course of the last 18 years or so. Competition crept into the MVPD industry, through satellite services (i.e., DirecTV and Dish) and telephone company offerings like FIOS. And while 200+ channels of non-broadcast programming may sound tempting, the viewing public still demonstrated an abiding affection for local TV stations. This happy confluence of trends was good news for broadcasters. Not so much for Big Cable.
Fast forward to New Year’s Eve, 2009, when a negotiating impasse between Fox and Time-Warner (one of the Big Cable team) splashed across the headlines and threatened to deprive millions of viewers of Fox’s New Years Day programming (can you spell “BCS”?). A couple of months later, ABC went mano-a-mano with Cablevision in the NYC market, cutting off carriage of the Oscars® for the first 13 minutes of the show before a deal was struck and the show went on.
And two days after the Oscars® face-off, who shows up at the FCC but Big Cable, petition for rulemaking in hand.
According to Big Cable, the retrans system has unduly favored broadcasters from Day One. The only reason Congress adopted the retransmission consent/must carry regime, so their story goes, was to prevent then-dominant cable systems from undermining free over-the-air broadcasting by exercising the market power that their monopoly positions afforded cable operators. They seem to think that, because broadcasters have gradually attained a more robust bargaining position, it’s time to have the guv’mint control the parties’ relationships.
In its Petition Big Cable acknowledges that in the early days of retransmission consent, cable systems were able to deflect paying cash compensation by agreeing to provide “in-kind” compensation – e.g.,agreeing to carry other non-broadcast programming channels in return for the right to carry the primary broadcast signal. Now that broadcasters are negotiating for cash compensation, however, Big Cable says that they and their MVPD confrères are (horror of horrors!) being forced to either (a) pay the broadcasters and pass those costs along to consumers, or (b) run the risk of having to remove the broadcasters’ programming from their systems. And, according to Big Cable, broadcasters have taken to making unreasonable demands on cable and satellite operators. (Here, Big Cable bemoans the fact that the “good faith” negotiation requirement is so vague that MVPDs have not been able to show that broadcasters’ demands have ever constituted “bad faith” negotiating tactics. Go figure.)
To “reform” the system, Big Cable advances a number of proposals that would shift the balance of power back more in Big Cable’s direction. Here are the main ones:
First, the Commission should establish a mandatory dispute resolution system for retransmission consent negotiations, to bail out MVPD operators who find themselves unable to persuade the broadcaster that the offer on the table really should be acceptable to the broadcaster. This system would come into play not just on a showing of broadcaster bad faith (remember, that’s too difficult to prove), but any time a cable or satellite operator claims that the parties cannot reach an agreement. Once the dispute resolution process was invoked, the appropriate compensation level would be established by arbitrators or some type of expert panel – not through direct negotiation between the parties.
Second, the new regime would effectively prohibit a broadcaster from demanding carriage of other programming services in return for the right to carry a broadcast signal by making such a demand a per se violation of the “good faith” negotiation requirement. Of course, Big Cable magnanimously suggests that the FCC should allow such arrangements, but only if the MVPD consents to them. That is, such an arrangement would be per se “bad faith” only if the MVPD didn’t like it.
Third, the Commission should impose an “interim” and continuing grant of retransmission consent for as long as (a) the MVPD continues to negotiate in good faith and/or (b) any dispute resolution process is ongoing. Adding that condition of “good faith” negotiation is interesting in view of Big Cable’s acknowledgement that it’s virtually impossible to establish that a party is negotiating in bad faith. So let’s get this straight. If the MVPD and broadcaster are negotiating, the MVPD gets to carry the broadcaster’s programming unless the MVPD is negotiating in bad faith, which is a showing everybody agrees can’t be made – so the MVPD gets to carry the programming. And if the negotiations reach an impasse (according to the MVPD), the only alternative is the mandatory and binding arbitration process – during which, again, the MVPD gets to keep carrying the programming. It would only be after the failure of both private negotiations and mandatory arbitration that a broadcaster could ever exercise its rights to prevent retransmission of its signals. It is unclear, however, how an arbitration process that is both mandatory and binding could ever fail.
The Big Cable proposals are stunning in their one-sidedness. The broadcasters and MVPDs will negotiate – until the MVPDs decide the negotiations are at an impasse and demands arbitration. A broadcaster seeking carriage of additional non-broadcast programming is automatically acting in bad faith – unless the MVPD agrees to it. A broadcaster must extend its retrans consent until a deal is reached – and reaching a deal is mandatory.
And while Big Cable tries to depict itself as really just looking out for the consumer, it’s not at all clear that that self-serving claim withstands scrutiny. Big Cable’s claim is that, if MVPDs are forced (through the retrans negotiation process) to pay broadcasters for carriage, then those additional costs will be heaped on the broken and bleeding backs of the consumers, who will have to pay more to the MVPDs in order to watch broadcast fare. But who said that the cost of carriage has to be passed through to the consumer? Are MVPD profit margins so low that Big Cable can’t absorb those additional costs and still make a tidy profit? Serious attention should be paid to such questions before anybody swallows the “poor little consumer” claims of Big Cable.
More fundamentally, the Big Cable proposal would transform the retrans consent bargaining process from a free market negotiation to a mandatory and binding arbitration, making it effectively impossible for a broadcaster ever to prevent a cable operator from retransmitting its signals.
It’s as if, back in 1992, Big Cable had agreed to play an ostensibly fair game of coin toss with broadcasters – but, because of cable’s then monopoly-based dominance, it was akin to playing with a two-headed coin, making it easy for Big Cable to win the toss each time. And now, 20 years or so into the game, with the two-headed coin removed and a more competitive normal coin put into play, Big Cable is saying that it’s happy to keep playing as long as the rules are tweaked ever so slightly to provide them with a “heads I win, tails you lose” option.
Big Cable has not limited its push to the Commission. Cable and satellite operators have also gone to Congress, sending a letter raising many of the same points to the House and Senate Commerce Committees. In response, the NAB has fired back with its own letter to those committees.
This is a fist fight that would ordinarily last some time, particularly because the Commission can be expected to be distracted from mundane mass media matters by its current preoccupation – nay, all-consuming obsession – for broadband issues uber alles. But in Congressional testimony on March 11, Chairman Genachowski said that the issue of the retrans consent process “is a subject that should be looked at seriously . . . for a framework that works for consumers.” Uh-oh. Cable’s play of the consumer card, heavy-handed and disingenuous though it may seem to many, may be the equivalent of Tinker Bell’s fairy dust which, when liberally sprinkled here and there, can cause otherwise flightless things to take wing. We shall see.
[Blogmeister’s Credit Report: This post was co-written by Dan Kirkpatrick, Jeff Gee and Harry Cole. Technical limitations prevent more than one author from appearing in the credit line above. The views expressed in this post are those of the authors and do not necessarily reflect the position of the law firm of Fletcher Heald & Hildreth, P.L.C.]
The Commission released an Order on Monday, March 3rd requiring broadcasters, MVPDs (i.e., cable, satellite), manufacturers and wireless service providers to commence specific public outreach initiatives to educate the public on DTV Transition matters. The Commission had released proposed rules in July, 2007, and has now taken steps to implement several of the proposed rules.
On the broadcast side, the Commission will require TV licensees to select one of three outreach programs. Each of the options includes a mix of Program Service Announcements (PSAs) and video crawls - all of which must be reported back to the FCC on a new form (FCC Form 388) describing the efforts. For example, under the first option, television stations would be required to air 15-second PSAs and run one 15-second video crawl four times a day, totaling 28 of each during the week. The second option would require only an average of 16 30-second video crawls and an average of 16 30-second PSAs each week, along with additional announcements in the last 100 days prior to the end of the Transition, and a "bug" on the screen that will provide a countdown to the end of the transition. The third option will be available only to noncommercial broadcasters, and would require them to air 60 seconds per day of consumer educational programming between now and April 1, and then 120 seconds per ay from May 1, 2008 to October 31, and finally 180 seconds per day from November 1 until the Transition. The Commission is not placing any requirements on Low Power and Class A television broadcasters, but urges them to commence educating the public with regard to the end of the DTV Transition.
On the MVPD side, the Commission will require that notices be placed in the monthly consumer bills, providing notice of the DTV Transition, and referring the consumer to other sources of information, including www.DTV.org. The Commission will require telecommunications carriers that provide Lifeline/Link-Up services to also include similar notices with their monthly bills. As for equipment manufacturers, each television receiver or other device intended to work with television receivers (i.e., converter boxes) shipped after the effective date of the rules must include information relating to the DTV transition, including how the transition will affect the use of the purchased device. Finally, the Commission committed to work with NTIA on making sure that their consumer help desks are staffed with persons knowledgeable about the transition.
The rules adopted in the order will become effective as soon as they are published in the Federal Register. The forms that are required to be filed will not become effective until after OMB approves them.