FCC Approves Order to Prohibit Joint Retrans Consent Negotiations Among Top Competing TV Stations
The FCC unanimously approved an order that prohibits competing top-four TV stations in a market from engaging in joint retransmission consent negotiations, as was expected (CD March 28 p1). The FCC is “leveling the negotiating table,” Chairman Tom Wheeler said Monday at the agency’s monthly meeting Monday. The order is aimed at helping to “curtail practices that would put upward pressure on cable companies,” he said. Joint negotiation by these stations “leads to higher retransmission consent fees because the practice reduces competition between the stations,” the Media Bureau said in a news release (http://bit.ly/1kjYotA). The commission also agreed to seek comment on a further notice of proposed rulemaking that looks at whether to eliminate or modify network non-duplication and syndicated exclusivity rules.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
The commission has seen significant changes in the video market, said bureau Chief Bill Lake. The item helps ensure that negotiations will be fair and effective, he said. It also may eliminate any pressure from retail price increases for subscription video services, said Raelynn Remy, a bureau attorney.
Cable companies have claimed that programming costs are increasing 10 percent each year mainly due to retrans fees, said Commissioner Mignon Clyburn. In 2011, the average cable bill was $86 a month and that cost is expected to reach $123 in 2015, she said. Clyburn added that upholding the non-duplication rule promotes competition and localism.
It’s clear to consumers that what they pay goes up too far and too fast, said Commissioner Jessica Rosenworcel. By limiting joint negotiations by TV stations, “I'm hopeful we can reduce the extent of retransmission consent blackouts,” she said. When stations jointly negotiate, retrans fees are higher, “and those higher charges get passed on to consumers,” she said.
Good-faith retrans negotiations generally involve two parties, said Commissioner Ajit Pai. “Adding a third or fourth party to the mix raises troubling competitive concerns.” The record indicates that joint negotiations “may result in supra-competitive increases in retransmission-consent fees,” he said. The anti-competitive potential of joint negotiations is only amplified by the regulatory context for video carriage, “including the compulsory copyright license, network non-duplication rule and syndicated exclusivity rule,” he said.
Commissioner Mike O'Rielly said that although he finds the record somewhat thin, the item aims to shield consumers from unreasonable price increases. It may not be necessary for the commission to enforce network non-duplication and syndication exclusivity rules when these can be addressed through private contracts, he said.
The order was supported by cable companies and rural wireline companies. The chief factor in rising cable rates “is the increasing cost of programming and today’s actions will help moderate those forces,” Charter Communications said in a statement (http://bit.ly/1hVleoD). The ruling will help defend consumers around the country from blackouts and higher prices, the American Television Alliance said in a statement (http://bit.ly/1mFBqkI).
Frontier Communications, CenturyLink and the Western Telecommunications Alliance backed the order. WTA said it’s looking to the commission to capitalize on the momentum of the action “to address the uneven video regulatory scheme designed for a bygone era that has resulted in higher video programming costs for consumers.” Since small rural video distributors are often forced to pay higher per-subscriber rates than large competitors, the commission should focus on creating a more even market “for small providers to ensure a competitive backstop for national video distributors in rural markets,” it said (http://bit.ly/1lixyDw).
NCTA called the action “pro-consumer.” By enforcing the good faith provisions of the retrans consent regime, the FCC’s “sensible action will help protect consumers from anti-competitive marketplace practices,” it said (http://bit.ly/1hcj3vG). Rep. Anna Eshoo, D-Calif., said it is “an important step toward rebalancing the playing field and ultimately protects consumers from unacceptable blackouts and increased rates.” Separately Monday, small- and mid-sized cable operators and Viacom were at odds over how much more the programmer should be paid for cable channels, in what some pay-TV executives said is akin to rising retrans rates. (See separate report in this issue.)
The Independent Telephone & Telecommunications Alliance supports elimination of network non-duplication rules. The rules are no longer necessary and suspending them would give video programming distributors the flexibility “to offer consumers alternative broadcast programming options when retransmission negotiations with a local television station stall,” it said.
NAB said the notion that a punitive crackdown on TV stations will lead to lower cable rates "is simply not credible” (http://bit.ly/1fH5bu2). Pay-TV companies “have been raising rates more than twice the rate of inflation for the last 20 years,” NAB said in a news release. “Never has a local TV station been found by the FCC to have negotiated in bad faith.” The American Cable Association, DirecTV and Dish Network also supported the order.