Retrans Price Inquiry Sought by Some, as FCC Gets Replies

Replies posted Tuesday in docket 10-71 on a commission rulemaking on retrans showed few new areas of disagreement between cable operators, DBS providers and telco-TV and nonprofit groups on one side and broadcasters on the other (CD June 28 p15). The record in the proceeding shows changes are “unnecessary” and some tweaks would exceed the agency’s authority, the NAB said. It asked the regulator to resist “the repeated requests” of MVPDs to “micromanage” thousands of retrans deals. Section 325(b)(3)(A) of the 1992 Cable Act doesn’t give the FCC leeway to make the “sweeping changes” sought by the pay-TV industry, the association said.

"MVPDs may not credibly suggest that FCC regulation of retransmission consent rates is necessary to protect consumers without also advocating that the Commission regulate retail rates MVPDs charge their consumers -- the latter of which MVPDs have long opposed,” the NAB said. “Despite their claims that retransmission consent fees raise costs to consumers, no MVPD has provided any credible evidence demonstrating that this is the case.” Retrans payments are “a small fraction” of MVPD programming costs and an “even more minuscule fraction of MVPD revenues and, thus, are not the driving force behind MVPD service rate increases,” the group said. Pay-TV providers seek broadcast rate regulation while contending their own prices can’t be regulated, seven broadcasters said. “Broadcasters get paid a fraction of what cable programmers receive for programming that is comprised largely of repeats of broadcast” shows or less-popular content, said Barrington, Gannett, Raycom, the Washington Post Co.’s TV unit and others.

Lead petitioner Time Warner Cable noted nearly all commenters except broadcasters agreed on the need to change regulations. AT&T and others made similar points. “Broadcast groups attempt to whitewash the consumer harm caused by their brinkmanship tactics,” contending retrans is market-based, Time Warner Cable said. “There is nothing market-based about broadcasters’ exploitation of the various regulatory preferences.” Section 623 doesn’t require cable operators put TV stations in their basic tier, despite what some broadcasters say, it said. “The Commission should amend its rules to make it a per se violation of the good faith negotiation standard for a fee-seeking broadcaster to bar carriage on an optional retransmission consent tier.” NCTA, with members in the broadcasting and cable business including Comcast, continued to sit out the rulemaking (CD June 1 p7).

Both DBS companies pushed back against broadcaster efforts to keep the status quo. TV station interests “refuse to recognize the shortcomings of the current retransmission consent regime, even when their own rhetoric services to highlight them,” said DirecTV. Sinclair pointed to the act, which says broadcast programming shouldn’t be treated differently than cable network owners’. “Yet broadcasters are treated very differently, as they enjoy a number of regulatory advantages that cable owners do not,” said DirecTV. Dish Network said concern that localism would be hurt by waiving exclusivity rules during blackouts is misguided. Compulsory licenses wouldn’t suffer because a temporary waiver would last only as long as the programming was down, Dish said. Broadcasters would keep exclusivity over network and syndicated programming if retrans agreements remain, it said. Localism would be better served if an MVPD is allowed to offer adjacent-market programming during a dispute because “broadcasters would be incentivized to invest more in the best possible local programming in order to render the adjacent market affiliate a seemingly weak substitute,” Dish said: It would “motivate parties” to reach a deal, because TV stations would “face a competitive cost in taking down its programming, just as the MVPD suffers competitive harm when it loses such programming."

The only changes the FCC can make on retrans are to good-faith rules, which set out what sorts of negotiating tactics are barred, communications lawyer John Hane of Pillsbury told us. He represents LIN TV on retrans, but said he spoke for himself only. The agency “can change the good-faith rules, but it can’t impose substantive constraints on retransmission deals just by calling them negotiating requirements,” Hane said. MVPDs say frequent carriage blackouts and rising retrans rates are problematic, without “showing broadcasters cause the interruptions” or providing “any reference point to show what’s ’too high'” price-wise, he said. “They provide no data at all about what they pay for broadcast versus other programming, and the FCC doesn’t seem to be interested in any quantifiable data about the market. The MVPDs are really just attacking the policy of retransmission consent -- but the FCC doesn’t own that policy."

Not so, said executives of the American Cable Association (ACA), which for years has sought an FCC inquiry on retrans. The commission can change rules other than just those covering bargaining, and “the FCC has far greater authority than it has stated that it has” in the rulemaking notice, said Vice President Ross Lieberman. He and President Matt Polka predicted there will be many more carriage showdowns, as talks to renew contracts expiring at year’s end heat up. FCC officials recently noted that many retrans deals have been getting done (CD June 16 p2). Polka disagrees with the commission’s “notion that things are working out well,” since Entravision’s WUNI Worcester, Mass., Univision affiliate has been off the Full Channel cable operator in Rhode Island (CD May 17 p16) since February, he said. “That’s one of the reasons we think they need to look at the data.” With more than 99 percent of retrans deals renewed without a blackout, an NAB spokesman said “policymakers should reject calls to inject government into private business negotiations.”

It would be best if the commission began an inquiry on retrans, but if the regulator also examines how much MVPDs pay for cable channels, that might be OK with the ACA, its executives said. The commission hears anecdotes that small MVPDs pay more per subscriber to TV stations than larger providers, “but the FCC doesn’t know that, because they don’t have a mechanism to collect” the information, Polka said. “You should find out.” The commission should collect data and keep it under seal so proprietary information would stay private, he said. “At least they'd have a better sense of what’s actually going on.” ACA’s filing noted that its survey had found small and mid-sized operators pay double the average per-subscriber retrans fees of large providers.

SureWest also sees the benefit in an FCC study of the prices MVPDs pay for cable and broadcast programming, Executive Director Greg Gierczak said. “That would be some good information for the FCC to really understand and start to get ahold of, because that creates an unlevel playing field as compared to some larger MVPDs,” in the prices smaller pay-TV companies like his pay, he said. “It could help inform the retrans” proceeding or “help inform the commission in some future proceeding it wanted to open up,” he added: “Information is good, and right now it just can’t be obtained because of the confidentiality” required in all programming contracts. Some owners of TV stations affiliated with major networks have said they support full disclosure of broadcast and cable carriage fees, Hane noted. But since MVPDs are “party to every single retrans negotiation and agreement,” they “have all of the evidence that exists, and they can provide it if they think it supports their case,” he said. “They are the complaining party and they have to prove their claims. The FCC doesn’t need to and it shouldn’t help them do that."

It would take a massive amount of time and money for the FCC to probe retrans prices, not to mention risking the wrath of the broadcasting industry and also upsetting cable programmers if pay-TV network fees were examined, too, said Public Knowledge Legal Director Harold Feld. He said it would be a “useful thing to do” and the data would be integral to the retrans proceeding and others on program carriage and program access and for the commission’s annual reports to Congress on video competition. Because pricing information is considered proprietary, and can’t be made public without a subpoena, “the only way you could do a real study if you're the FCC is to mandate the companies cough up their contracts,” Feld said. “The agency does not have a huge budget and does not have the kind of political capital and the willingness to spend it to pull this off in any way that might be useful.” Feld said such data’s not needed to show retrans needs fixing.