FCC to Review Good Faith Rules in Retransmission Deals

Keep up with the latest developments and legal issues in the telecommunications and emerging technology sectors, with exclusive access to a comprehensive collection of telecommunications law news,...

By Lydia Beyoud

Sept. 2 — The FCC issued a much-anticipated notice of proposed rulemaking that proposes to review and modify the “totality of the circumstances test” for evaluating whether broadcasters, cable and satellite TV providers are engaged in good faith negotiations related to retransmission consent negotiations.

The goal of the proposed rulemaking is to ensure that negotiations are conducted fairly and in a way that benefits consumers of video programming services, the Federal Communications Commission said in a Sept. 2 news release.

Blackouts resulting from retransmission consent disputes between broadcasters and multichannel video programming distributors (MVPDs) have increased exponentially in the past five years, according to industry analysts. A dispute between Sinclair Broadcast Group Inc. and Dish Network Corp. resulted in the largest blackout—about 5 million satellite-TV customers were unable to access local channels on Aug. 26 until the FCC stepped in to defuse the situation.

Pay TV providers have pointed to that event and others as underscoring the need for change. They have said the rules established in the 1992 Cable Act haven't kept up with market realities offering consumers a broad choice of MVPDs and online video distributors. In addition, they say the rules have enabled broadcasters to charge increasingly high retransmission fees for their content.

SNL Kagan has estimated that retransmission fees could reach $10.3 billion by 2021, a sharp increase from the projected 2015 total of $6.3 billion.

In the NPRM, the commission acknowledged many of these concerns and sought comment on what practices should be identified as violations of the good faith requirements under the totality of the circumstances test.

The STELA Reauthorization (STELAR) Act of 2014 required the agency to commence by Sept. 4 a proceeding to review the “totality of the circumstances test” for retransmission negotiations for MVPDs to carry broadcaster programming.

Orphan Counties

The FCC also approved new rules allowing satellite TV providers to modify the markets they serve to help them carry broadcast signals most relevant to communities located in so-called orphan counties, also pursuant to its statutory deadline under STELAR.

Satellite providers are required to use designated market area (DMA) assignments by Nielsen Co. to determine which TV broadcast stations to carry and include in their local programming packages. Currently, households included in a broadcast TV provider’s DMA may reside in another state, preventing them from receiving local news, weather emergency information, elections results or local sports broadcasts.

Only about 0.02 percent of American households are in orphan counties where they can't receive their local news via satellite, according to the FCC figures but, for that minority, the issue has remained a vexing problem.

The item was approved by four of the commissioners, with Republican Commissioner Michael O'Rielly approving in part and dissenting in part.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

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

Text of the FCC news release is at http://src.bna.com/fX.

Text of the NPRM is at http://src.bna.com/fY.

Request Tech & Telecom on Bloomberg Law