FCC Staffers Working on Retrans NPRM May Eye Good Faith

Scrutiny of what constitutes good-faith bargaining between subscription-video providers and TV stations seems to be continuing at the bureau, commission and industry officials said. The staffers seem to be weighing how to balance the arguments of broadcasters, who contend retrans as-is works, and pay-TV providers seeking changes to how the commission handles disputes, agency and industry officials said. It’s unclear the extent to which the forthcoming notice will ask about the economics of retrans deals -- subject of a panel discussion last Friday -- but some at the commission and in industry said they hope it will address such issues. A bureau spokeswoman declined to comment.

Besides asking about good-faith, the draft notice also likely will ask about how other commission rules including those preventing network duplication by pay-TV providers and contractual arrangements including syndicated broadcaster exclusivity affects retrans, an FCC official predicted. Bureau staffers seem to be trying to strike the right balance between broadcasters and pay-TV in writing the item, agency and industry officials said. They said that may involve making tweaks to the in-progress item. The item may also discuss an assertion by Chairman Julius Genachowski in an October letter to Sen. John Kerry, D-Mass, who was eying retrans legislation, that the regulator has limited authority to order carriage when programming blackouts result from a lack of good-faith negotiations, an industry executive said.

The FCC’s top economist on Friday mapped out some retrans questions that industry and commission officials told us they hope will be addressed in the rulemaking. Chief Economist Jonathan Baker, during a panel on Capitol Hill (CD Jan 24 p6), personally sought an understanding of how retrans costs are passed along to pay-TV companies and their subscribers and what factors account for rising cable bills. The American Television Alliance, many of whose members had petitioned the FCC for retrans rule changes, would “welcome the FCC’s consideration of the costs of delayed or impeded entry of new programming services such as niche channels and the lost opportunities by” pay-TV companies “to put channel capacity to better use” because of retrans deals, a spokesman said. “It is also important that the FCC consider the impact on consumers not only of blackouts, but the threats of blackouts, which reduce the perceived quality” of pay-TV service, he added. An NAB spokesman had no comment.

If the commission can get access to economic data and other information on retrans, it will “discover there are serious problems with the market that harm consumers,” said Vice President Ross Lieberman of the American Cable Association (ACA) among petitioners for changes to retrans dispute-handling rules. “They would find that there’s rampant price discrimination against smaller” pay-TV providers “and that broadcasters extract higher fees by forming local pacts to jointly negotiate retransmission consent,” Lieberman said. “However, I'm doubtful the FCC will ever get the data and information they need.” Broadcasters, “who include non-disclosure agreements in all of their retrans agreements,” never will give “small cable operators the right to share the necessary data and information with the commission on the issues important to smaller operators,” he said.

Baker raised “fundamental questions that need to be answered if the commission is going to make a data-driven decision on how any changes are likely to affect consumers,” said Technology Policy Institute Vice President Scott Wallsten, an economist who moderated Friday’s panel. “I would also like to see the commission identify the problems each part of the retrans regime is supposed to address and examine which rules are still necessary given changing markets. I suspect that such an investigation would lead to a conclusion that some rules are still important and that some are not."

Some lobbyists had wanted to meet with commission officials when some in industry and at the commission thought the rulemaking would be set for a vote at the Feb. 8 meeting (CD Jan 19 p17), though the commission has since signaled that the order won’t be voted on then, agency and industry officials said. Requests to have ex parte meetings continue, agency and industry officials said. CenturyLink and Verizon executives visited the commission to talk about retrans in recent days, filings in docket 10-71 show. Verizon said the commission should end network non-duplication and syndicated exclusivity rules, echoing the company’s previous comments.

CenturyLink said it supports the petition that was filed by ACA, Cablevision, the two DBS companies, Time Warner Cable, Verizon and others for changes to commission handling of retrans spats, a message executives relayed to Lake and other bureau front-office officials on Friday. The commission should examine other problems facing new pay-TV providers, including talks for contracts that are “inconsistent with the good faith bargaining that the Commission is charged to enforce,” the telco said. “CenturyLink is facing denials of key programming, which can make it infeasible to begin offering service, and discriminatory and unreasonable retransmission fee demands.”