Wheeler's Retrans Comments Signal to Some He May Try To Crack Down

"We must begin a rulemaking to review how to apply the totality-of-the-circumstances test to assess whether retransmission-consent negotiations are being conducted in good faith," Wheeler said at the cable industry gathering in Chicago, where he focused on net neutrality and online video (see 1505060057). On the retrans issues, "we will seek your comment, and we are committed to empowering competition," Wheeler said. A Media Bureau spokeswoman declined to comment further.

Wheeler's comments were understood by those in the audience, others who read the prepared remarks and agency officials to be referring to the 2014 Satellite and Television Extension Localism Act Reauthorization Act, which became law Dec. 4. Within nine months, it said, the FCC must start a rulemaking "to review its totality of the circumstances test for good faith negotiations under clauses 12 (ii) and (iii) of section 325(b)(3)(C) of the Communications Act." None of the lawyers we spoke to were aware of FCC rules on what constitutes the totality of circumstances. FCC good-faith retrans rules from 2000 say that under the totality of the circumstances standard, an MVPD can "present facts to the Commission which, even though they do not allege a violation of the objective standards, given the totality of the circumstances reflect an absence of a sincere desire to reach an agreement that is acceptable to both parties and thus constitute a failure to negotiate in good faith." While the agency said it "will not ordinarily address the substance of proposed terms and conditions or the terms of actual retransmission consent agreements, we will entertain complaints under the totality of the circumstances test alleging that specific retransmission consent proposals are sufficiently outrageous, or evidence that differences among MVPD agreements are not based on competitive marketplace considerations, as to breach a broadcaster's good faith negotiation obligation."

Wheeler could use the requirement that the commission examine the totality test as a way to take a second bite at changing retrans rules, since the Genachowski-era proceeding on good-faith negotiations remains an open docket (10-71), said lawyers who back changes, those who oppose them and those not taking sides. They cautioned that Wheeler may have merely tried to show the cable industry members he's not totally against them by mentioning the coming proceeding, rather than signaling he's inclined to side with them on retrans. That he even mentioned it raised some speculation he might act. In what Guggenheim Partners analyst Paul Gallant called an "oblique" reference to retrans, "it’s certainly possible this rulemaking will simply preserve the status quo," he emailed investors. "But given the importance of retrans to broadcasters -- and Mr. Wheeler’s repeated references to rising cable rates -- it bears watching as a vehicle for the FCC to potentially decide that certain issues related to retrans -- online blocking of shows during disputes, blackouts themselves, and/or channel bundling -- are now relevant to the FCC’s interpretation of what constitutes 'good faith negotiation' by broadcasters."

Cable executives in the audience who are optimists would interpret Wheeler's remarks as a signal that he's inclined to act, said BakerHostetler cable lawyer Gary Lutzker by phone from Chicago. "Most people would like to interpret it as, 'Yes, we are going to look at that good faith rule and perhaps make an adjustment to your benefit.'" It's hard to say what will happen since the rulemaking hasn't begun, Lutzker said. That Wheeler made the comment might be positive for reform proponents, said one such backer, Vice President-Regulatory Affairs Micah Caldwell of ITTA, a member of the American Television Alliance (ATVA), which backs changing retrans rules. "Even if there is an appetite to do more than they have done thus far, it sounds like it's definitely a partisan issue." Caldwell pointed to a speech earlier this week by Commissioner Mike O'Rielly. "The role of the FCC in the retransmission consent process is limited by the statute and the authority provided by Congress," said his prepared remarks from a speech to WTA. "We are limited to ensuring that the private negotiations are being done 'in good faith' with certain parameters on what that means. I stand ready to utilize our authority if a party or multiple parties act outside this requirement."

MVPDs could rue a close review of retrans, because they might find that they're not abiding by the rules, some broadcast lawyers said. They and an NAB spokesman said broadcasters have never been found to have violated good-faith rules, only MVPDs.

“This is going to be uncomfortable for everybody," predicted broadcast lawyer Jack Goodman, who frequently works on retrans contracts. “It’s going to be a hot debate at the commission in terms of what Congress meant.” The proceeding "potentially gives the FCC a vehicle to act," and is one among a few proceedings that could get swept "into one big one under the STELAR umbrella," said Wilkinson Barker broadcast and media lawyer Rosemary Harold. "I have difficulty seeing how the commission gets past the language in the existing part of the retrans statute" from the 1992 Cable Act saying TV stations can determine who can carry their signal as long as they act in good faith, she added.

NAB is "confident that the review will validate that broadcasters are committed to engaging in good faith when stations are involved in retrans negotiations," its spokesman said. The American Television Alliance said "as Congress recognized, consumers bear the costs of skyrocketing programming and broadcaster blackouts." ATVA, with partners that its website said include the American Cable Association, CenturyLink, Charter Communications, Dish Network, DirecTV, USTelecom and Verizon, said it "looks forward to working with the FCC to ensure that negotiations for broadcast programming protect consumers" and enhance choice.