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House Republicans Consider STELA Changes, Nixing Firms CableCARD Requirements

Thursday, February 27, 2014

By Bryce Baschuk  

Feb. 26 --In a surprising policy shift, House Republicans are considering some controversial changes to the rules that govern the U.S. video marketplace, Capitol Hill and industry sources told Bloomberg BNA.

Leaders on the House Energy and Commerce Committee are preparing to unveil draft legislation that will reauthorize the 2010 Satellite Television Extension and Localism Act (STELA) before April 1. STELA, which authorizes satellite providers to retransmit broadcast television signals, is set to expire on Dec. 31, 2014.

The draft legislation may seek to renew STELA for five years and eliminate CableCARD requirements for cable companies, sources told Bloomberg BNA. The bill may also modify retransmission consent rules for pay TV companies so they can negotiate broadcast carriage agreements jointly or separately with two broadcast stations that have advertising arrangements known as joint sales or shared services agreements, sources said.

The draft proposal will not, however, seek fundamental changes to the current retransmission consent regime, they said.

Walden Waffling?

Offering any substantial modifications to STELA would mark a dramatic shift for Rep. Greg Walden (R-Ore.), the chairman of the Communications Subcommittee.

As recently as December Walden, who formerly owned a broadcast radio station, said STELA was the wrong legislative vehicle to update broader elements in the nation's telecommunications laws including retransmission consent rules. Walden and Commerce Committee Chairman Fred Upton (R-Mich.) said those changes should be addressed in their multiyear effort to rewrite the Communications Act. A committee spokesman did not comment.

The Energy and Commerce Subcommittee on Communications and Technology will examine STELA issues during a March 5 hearing at 10 a.m. in room 2123 of the Rayburn House Office Building.

STELA Legislation Pending

Lawmakers and the Federal Communications Commission have sought to address retransmission consent issues following much-publicized blackouts of local TV stations, sometimes lasting weeks, for millions of customers of cable and satellite companies. Section 325(b) of the Communications Act requires broadcast television stations and multichannel video programming distributors (MVPDs) to negotiate retransmission consent agreements “in good faith.” When negotiations break down MVPD's are prevented from carrying broadcast signals which results in program blackouts for certain customers.

Broadcasters have sought higher fees from distributors to retransmit their network programming as a means to offset declining advertising revenues and increased sports programming costs. Total retransmission fees for 2013 were estimated at $3.3 billion and are projected to increase to $7.6 billion by 2018, according to recent estimates offered by SNL Financial LC. Broadcasters argue that a majority of retransmission consent negotiations are completed without disruptions for viewers and emphasize that broadcasters' signals are always available to consumers free over-the-air.

Retransmission consent is a “free market negotiation that allows broadcasters to negotiate fair compensation for our most watched TV programming,” Dennis Wharton, a spokesman for the National Association of Broadcasters told Bloomberg BNA. “It is wholly unrelated to a possible STELA reauthorization. We will oppose any linkage between the two.“

The top Democratic and Republican lawmakers on the Senate Committee on Commerce, Science and Transportation sought input from stakeholders in a Feb. 25 letter. The letter asked whether Congress should seek to modify the current retransmission consent regime so that it better protects consumers from harm. The House and Senate Commerce committees share jurisdiction over STELA with the House and Senate Judiciary committees.

FCC Integration Ban

Republican lawmakers also may seek to retire rules that govern video set-top box controls, industry sources told Bloomberg BNA. Communications Subcommittee Vice Chairman Bob Latta (R-Ohio) has sought to remove the FCC's integration ban and preserve its ability to regulate set-top boxes with his bill H.R. 3196.

Section 629 of the 1996 Telecommunications Act ensures that consumers have adequate access to navigation devices in order to view multichannel video programming. In 2003, the FCC adopted industry-developed standards for a CableCARD security device that would permit video navigation devices to allow televisions to display encrypted multichannel video programming distributor (MVPD) content. The commission subsequently ordered an integration ban that prohibited MVPDs from integrating security functions into their own set-top boxes in order to ensure adequate MVPD support for CableCARDs.

The issue gained momentum last year after TiVo Inc. filed a petition with the FCC to reinstate CableCARD customer access rules until another technological solution is made available.

TiVo's petition stems from a 2013 decision by the U.S. Court of Appeals for the District of Columbia Circuit that overturned the commission's “plug and play” rules for video devices after concluding the FCC lacks the statutory authority to restrict encoding technologies that prevent consumers from recording certain television programs (EchoStar Satellite v. FCC, D.C. Cir., No. 04-1033; 04-11090, 1/15/2013). The court's decision vacated the FCC's 2003 order and created regulatory uncertainty as to cable operators' obligations to support consumer access to CableCARDs because the commission's CableCARD rules were contained in the same commission rulemaking.

 

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

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