FCC Seeks to Avert Retrans Blackout Between Dish, LIN

The potential carriage cutoff could have come a day after the FCC approved a rulemaking notice on retrans practices (CD March 4 p4). Democratic and Republican commissioners alike said the proceeding shouldn’t be used as an excuse by broadcasters or pay-TV companies not to reach new carriage deals. Some industry officials said they hoped that having the rulemaking would avert future shutoffs, though it’s unclear if this cutoff would be averted. Executives at Dish and LIN each said their company was doing all it can to avoid a blackout, while blaming the other side for the potential impasse.

Media Bureau staffers have been speaking with representatives of Dish and LIN in the past week and have been apprised of where talks stand, agency and industry officials said. That’s typical for the FCC when such carriage disputes draw near, they noted. A bureau spokeswoman declined to comment.

FCC Chairman Julius Genachowski singled out Dish and LIN in his comments at Thursday’s meeting, but without naming them. “Even as we vote [on] this item, there is a looming retransmission consent impasse” between companies he described in vague terms but that fit the two companies. “Consumers have reasonable and understandable concerns” about such blackouts, he said. “No one can take this” rulemaking “as an excuse to drag their feet” in retrans deals, which “won’t be tolerated,” Genachowski said. Those were some of his strongest words yet on retrans.

Dish and LIN last week exchanged letters to bureau Chief Bill Lake on the potential impasse, with each side saying the other was in the wrong. LIN said it was surprised the DBS company declined the broadcaster’s offer of a month-long carriage extension (CD March 2 p16). That’s because Dish has asked the commission to require parties to continue carriage “on terms of expiring retransmission agreements” when there is a blackout, LIN said. “We are running as hard as we can to get this done before Dish’s deadline,” LIN Vice President Rebecca Duke told us. “We've been keeping the FCC informed -- sending updates and responding to status requests. The Media Bureau wants the parties to reach agreement as much as we do, and their requests for updates have been perfectly appropriate.” A Dish spokesman confirmed it too has been in touch with the bureau.

It’s LIN that “wrongfully claims that ‘DISH made the decision to terminate carriage,'” Dave Shull, senior vice president of Dish, wrote Lake. “LIN’s latest offer represents a 140 percent rate hike and contains other burdensome contract terms that ultimately will result in higher prices for consumers.” A Dish spokesman said the broadcaster has since revised that deal to be a steeper increase in the first year of the proposed multi-year contract. He wouldn’t specify what if any subsequent rate increases were sought or say how many of Dish’s 14.1 million U.S. subscribers would be affected by a blackout of LIN’s stations in what some call “tier two” markets. LIN’s Duke responded that “percentages are meaningless without context” and that “in absolute terms, our rate increase is modest."

A Time Warner Cable executive was hopeful Dish and LIN will reach a deal. That cable operator, along with Dish, DirecTV and other pay-TV companies, has sought changes to FCC retrans rules. “I don’t ever think it’s a good thing when viewers lose access to signals,” Gail MacKinnon, head of Time Warner Cable’s Washington office, told us. “It’s a good question whether or not broadcasters will look to an open proceeding at the FCC on this issue and whether or not it will impact the posture of the negotiations in their willingness to pull down their signals,” she said. But previously “I think the broadcasters thought they had [no] skin in the game because the FCC had made clear that it was not going to intervene in any particular disputes,” MacKinnon said. Now, “the commission has indicated that it’s willing to change its rules,” although that may not reflect any deals done in the short term, she said.

Time Warner Cable was among those disappointed the FCC didn’t say in the rulemaking that it can require interim carriage or mandatory arbitration during a blackout if either side was found by the agency not to have negotiated in good faith. Genachowski “has made clear that he doesn’t think the FCC has the authority to intervene in these disputes,” MacKinnon said. “We profoundly disagree with that.” The agency “needs to do more to help consumers, instead of just helping the cable companies and broadcasters,” and good-faith “bargaining does little to prevent subscribers from losing access to channels they are paying for when a dispute arises,” said Joel Kelsey, Free Press policy advisor. Public Knowledge hopes the regulator will “take a more active role than it has in the past in bringing some order to the retransmission chaos,” said Legal Director Harold Feld.

The commission was correct to find the “marketplace is best equipped to negotiate private business contracts, and that it lacks authority to impose the heavy-handed government tools that pay-TV providers desire,” said NAB President Gordon Smith. “Even the threat of injecting government into a market-based process only incentivizes pay TV providers to game the process.” Several analysts said the rulemaking wasn’t as much a negative for broadcasters as some had feared, since it still says that the commission doesn’t believe it can require carriage or arbitration. “The FCC comforted broadcasters” by saying that, Stifel Nicolaus analysts wrote investors.