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.