FCC Looks to Reform Retrans Rules
There's a lot of money at stake in content licensing agreements, and when negotiations go south, it's not only the big guys who lose out.
To protect consumers from TV blackouts, Federal Communications Commission (FCC) chairman Tom Wheeler is in the process of circulating an order that would give pay-TV providers the ability to import an out-of-market broadcast signal if a local broadcaster decides to withhold content. The move would replace existing "exclusivity rules" regulating out-of-market broadcasts and would substantially tip the balance of power in retransmission negotiations toward pay-TV providers.
"These rules prevent an MVPD from providing subscribers an out-of-market broadcast station, for example, when a retransmission consent dispute results in a local station being dropped from carriage," said Wheeler in a blog post. "In this item, the Commission takes its thumb off the scales and leaves the scope of such exclusivity to be decided by the parties, as we did in the Sports Blackout Order last year. In so doing, the Commission would take 50-year-old rules off our books that have been rendered unnecessary by today’s marketplace."
With the rapid rise of broadcast licensing fees in recent years, pay-TV operators have been clamoring for the FCC to take up retransmission reform. According to SNL Kagan (as reported by the American Television Alliance), retransmission rates for broadcast networks will hit $6.3 billion in 2015 and rise to $10.3 billion by 2021. Rep. Anna Eshoo (D-CA) once called the business "frankly a racket," and the American Cable Association (ACA) has made retransmission consent one of the top issues on its regulatory agenda. (See Rep. Rips Retrans 'Racket' .)
"Exclusivity rules are a linchpin of the local broadcast business model and help sustain viewer access not only to high-quality network entertainment programming, but also to local news and lifeline information. The order currently circulating at the Commission imposing changes to these rules would threaten the vibrancy of our uniquely free and local broadcast system. NAB strongly opposes this order that would ultimately cause harm to consumers and their reliance on localism.
Beyond the order on exclusivity rules, Chairman Wheeler also circulated a notice of proposed rulemaking (NPRM) to "review the so-called 'totality of the circumstances test' for good faith negotiations over transmission of broadcast TV signals," suggesting he wants the FCC to look at negotiations even beyond the blackout issue. He noted that the Commission will evaluate negotiation practices and attempt to ensure that they are handled fairly "and in a way that protects consumers."
— Mari Silbey, Senior Editor, Cable/Video, Light Reading