Retrans Disputes Poised to Dominate House STELA Hearings

The House will tackle retransmission consent issues in two subcommittee hearings this week, with draft legislation already on the table after the recent retrans deadlock between CBS and Time Warner Cable. Retrans disputes will dominate discussion, as will the role of the Satellite Television Extension and Localism Act in preventing any potential consumer harm. Portions of STELA will expire Dec. 31, 2014, and parties plan to argue Tuesday about how to tweak the act, with sentiments split as some plan to defend the Copyright Act’s Section 111 cable and Section 119 satellite compulsory copyright licensing while others will argue for its repeal.

Eshoo’s draft bill proposes to prevent such “blackout” impasses by giving the FCC statutory authority to ensure consumers can purchase cable TV without subscribing to broadcast stations opting for retrans consent and to prevent TV broadcast stations in such retrans consent negotiations from using their owned or affiliated programming as negotiation leverage, said Eshoo’s office. It will ask the FCC to investigate whether blocking such programs during negotiations is a failure to negotiate in good faith and calls for the FCC to study programming costs for regional and national sports networks in the top 20 regional sports markets.

NAB “strongly opposes” Eshoo’s draft, said President Gordon Smith in a statement. He said he’s “surprised by the pro-pay TV slant” of her draft bill “which could embolden pay-TV giants to continue to game the system rather than negotiate in the free market for programming most valuable to viewers.” He denied there’s any “'black-out’ of broadcast TV programming” and insisted NAB’s goal is to increase viewer access to programming. “A truly ‘pro-consumer’ bill would ask whether Time Warner Cable’s attempts to restrict that access to only its ‘TV Everywhere’ model does the same,” he said. He called it troubling that “a proposal billed as ‘pro-consumer’ continues to allow pay-TV providers to avoid viewer rebates for loss of broadcast TV programming during a disruption. Coincidentally, the draft bill is also silent on ending the practice of charging consumers upwards of $200 in ‘early termination fees’ to shift to another pay-TV provider during a disruption.” He slammed Time Warner Cable, Dish and DirecTV for Washington lobbying in “manufacturing a crisis over retransmission consent, when in fact it is these three companies responsible for nine out of 10 disruptions of service.”

The American Cable Association, the American Television Alliance and Dish applauded Eshoo’s proposal. It offers “concrete legislative ideas to give consumers greater choice over their programming, tackles the growing problem of bundling of cable channels with network channels, and empowers the FCC with significant authority to curtail blackouts,” said Dish Deputy General Counsel Jeffrey Blum in a statement. Dish wants “meaningful legislation” to “fix the broken retransmission consent system,” Blum said. ACA President Matthew Polka called the draft “a set of commonsense reforms.” ACA agrees the FCC “should have the authority to prevent TV signal blackouts as part of its mandate to protect the public interest, convenience and necessity,” Polka said in a statement. “We also agree with Rep. Eshoo that consumers should not have to buy local TV stations that elect retransmission consent as part of their pay-TV package.” ACA agreed “the time has come” for an FCC study as the bill proposes, he said.

The House Communications Subcommittee will hold its STELA hearing 2 p.m. Wednesday in 2123 Rayburn. Witnesses will include Dish General Counsel Stanton Dodge, KPHO-TV Phoenix Vice President Edward Munson, Suddenlink Communications Executive Vice President David Rozelle, CenturyLink Vice President-Regulatory and Legislative Affairs Jim Campbell, Copyright Alliance Executive Director Sandra Aistars and Public Knowledge Senior Staff Attorney John Bergmayer. Dodge and Campbell will also testify 10 a.m. Tuesday in 2141 Rayburn before the House Subcommittee on Courts, Intellectual Property and the Internet. Other witnesses include Nielsen Executive Vice President Paul Donato, Arnold & Porter attorney Robert Garrett on behalf of Major League Baseball, Shentel Cable Executive Vice President Earle MacKenzie on behalf of ACA, former ABC Television Network President Preston Padden testifying on his own behalf, and Covington & Burling attorney Gerard Waldron on behalf of NAB.

Retrans debate will dominate House Judiciary discussion Tuesday, advance testimony shows. Dish’s Dodge plans to slam the retrans system as “the most destructive and outdated remnant” of the 1992 Cable Act, where “every year we see more blackouts during contractual disputes between broadcasters and their distributors, lasting longer than in the past, and impacting millions more subscribers” (http://1.usa.gov/17RPY6u). Dodge will voice Dish’s support for measures such as “interim carriage authority, which would temporarily permit a distant signal to be imported during a retransmission consent dispute.” His testimony urges Congress to renew STELA and incorporate fixes to retrans disputes into the reauthorization.

The CBS-Time Warner Cable dispute was the “latest and most visible sign of serious flaws in the rules governing the retransmission consent market,” ACA’s MacKenzie plans to testify (http://1.usa.gov/15QJxxJ). “The main problem is that Congress passed a law based on marketplace conditions that no longer exist.” MacKenzie will spotlight the consumer harm that disputes cause and attribute it to broadcasters’ “flouting current rules, including antitrust laws, by colluding in their sale of retransmission consent.” Rules and regulations don’t “protect consumers from broadcasters that pull their signals during retransmission consent negotiating impasses” and “require consumers who subscribe to cable service to also subscribe to the broadcast stations that elect retransmission consent, even if they don’t want to receive those broadcast stations via their subscription service,” he will add, advocating Congress look to “narrowly tailored fixes” as part of STELA reauthorization.

NAB will defend broadcasters’ good faith negotiation, according to prepared testimony by Waldron (http://1.usa.gov/15MkFOf). NAB highlights localism’s importance in reauthorizing STELA as well as retrans, noting the likely advocates of new exceptions to STELA copyright provisions “that would undermine broadcasters [sic] retransmission consent right.” Its testimony refers to U.S. broadcasters’ urging the subcommittee “to resist these overtures, since they would pose significant harm to the locally-focused broadcast model that has served the viewing public so well for decades.” It will warn against “a change in law that would permit a satellite carrier to import a distant signal -- not based on need, but to gain unfair market leverage in a retransmission consent dispute.” NAB will ask the subcommittee “to consider whether the time has come for this ’temporary’ distant signal license [of Section 119] to sunset,” given its “narrow scope.”

Satellite and cable compulsory licensing provisions “are impediments to the operation of the free marketplace,” Garrett plans to say on Major League Baseball’s behalf. “They unfairly deprive all copyright owners, including Baseball, of the ability to control the distribution of their copyrighted works -- as well as the right to receive fair market compensation and other license terms typically included in marketplace agreements.” Padden will also back the repeal of cable and satellite compulsory copyright licensing (CD Sept 9 p15). The Section 111 cable statutory license has for copyright holders and cable operators “served its goal in compensating copyright holders for the retransmission of their work in a way that is minimally burdensome,” ACA’s MacKenzie will say. He plans to urge Congress not to repeal Sections 111 and 119. The repeal would create “very difficult burdens, both logistically and financially,” he will say.

Amend the 1992 Cable Act “to allow providers the right to carry national programming from an adjacent or alternate market during a broadcast retransmission consent negotiation breakdown,” CenturyLink’s Campbell plans to say (http://1.usa.gov/14zh6dy), urging that such “deregulatory” changes be implemented into STELA. “Consumers should not be punished as a result of provider negotiations.”