Walden Pushes for Flexibility, Fair Compensation in Road to Communications Act Rewrite
Modernizing the Communications Act should take a flexible approach that will allow content providers to innovate and fairly compensate content creators and investors, said House Communications Subcommittee Chairman Greg Walden, R-Ore., Wednesday at a retransmission consent event at the Hudson Institute in Washington. He also cautioned against relying solely on reauthorizing the Satellite Television Extension and Localism Act (STELA) to update communications laws. He announced Tuesday that the subcommittee and the full House Commerce Committee plan to take steps toward rewriting the Communications Act in 2015 (CD Dec 4 p1). Meanwhile, industry and lawmakers expressed doubts about any quick overhaul. (See separate report in this issue.)
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It’s time “to take a hard look at the increasing gap between the outdated law and the incredible innovation and investment that the Internet has brought to every silo of communications,” Walden said. The laws don’t reflect today’s dynamic market, he said: “In the on-demand world of the Internet and mobility, the statutes that govern the digital marketplace are blissfully ignorant of the changes that have taken place around them."
One principle of Walden’s suggested approach is aimed at getting outdated government rules off the books, he said. Congress must regulate in terms of making the law nimble enough “to allow innovators to satisfy the demands of consumers,” he said. Legislators must ensure that legacy regulations aren’t holding companies back from innovating and investing, he said. Another key principle involves ensuring that creators of video content are compensated fairly for their work, Walden said. It would make little sense to change the retransmission consent regime without considering the effects of the compulsory licensing system as well, he said.
Walden acknowledged that the vast majority of retransmission consent agreements are resolved quietly, calmly and without incident: “For decades the market has functioned smoothly.” A meaningful update to the law “will require careful examination of the intertwined value chain and a clearer understanding of the ramifications of any changes on the businesses involved and their consumers,” he said.
STELA is the wrong place to make changes to the video market regime, said Walden, saying subcommittee member John Dingell, D-Mich., agrees. As Congress and industry work to improve STELA, “advocates would be wise to remember that the satellite laws aren’t the Cable Act,” said Walden. “Our cable laws are in need of updating too, but the satellite reauthorization is not the time or place for that debate.” During the transition in the video programming market, “people in the video programming and distribution industries are far more capable than Congress to make the tough calls needed in this business,” he added.
Content owners and distributors have a very strong incentive to enter into agreements and avoid consumer disruption, said Covington & Burling attorney Gerry Waldron, who represents broadcasters and NAB. That’s why “99.99 percent of the viewing in America is never touched by a retransmission consent dispute,” he said during a panel moderated by former FCC Commissioner Robert McDowell. Those principles guided Congress when it adopted retransmission consent, and Walden wants to use those same principles for the rewrite, Waldron said.
It’s compulsory licensing, not retransmission consent, that should be removed, said Jeffrey Eisenach, an economist at the American Enterprise Institute. “If you repeal retransmission consent, and do nothing else, what you have done is expropriate billions of dollars in property rights.” Despite the market for the Internet, people are watching TV content on TVs today more than ever before, he said. “That’s an indication that this market is working.” Other issues in the video market, such as IP TV and over-the-top video and Aereo, must be addressed, he said.
TV broadcasters have additional leverage they no longer need, said Steve Pociask, president of the American Consumer Institute Center for Citizen Research. It would be better “to let the market work this out without providing that negotiating leverage,” he said. While blackouts aren’t very prevalent, “they've increased and set records for the last three years,” he said. Consolidation and shared services agreements also give broadcasters leverage, he added.
Walden’s resistance to using STELA to reform retrans will likely make it difficult for pay-TV providers to insert related changes into the satellite-TV copyright license bill, said Stifel Nicolaus analysts. “But it could also complicate any effort by broadcasters to add amendments to ensure copyright/retrans payments from Aereo or other Internet video providers.” Addressing compulsory copyright issues may leave the door open to making retrans revisions along with other possible changes in the satellite-TV copyright bill, “perhaps a pro-broadcaster fix to the Aereo problem,” they said in a research note.
Pociask cautioned that the retransmission consent fees amassed by broadcasters could “disincentivize” participation in the broadcast spectrum incentive reverse auction. “Those losses are much bigger than the losses that are occurring on cable,” he said. That runs counter to the FCC National Broadband Plan and the auction, ACI said in a study released Wednesday (http://bit.ly/1g7A938).