Genachowski Urges Fox, Cablevision to End Carriage Dispute
FCC Chairman Julius Genachowski urged CEOs of Fox and Cablevision to end their retransmission consent dispute, he said, saying he spoke to officials at both companies by phone Tuesday. “I reminded the companies that they share responsibility for consumer disruption, and that they shouldn’t punish consumers because of their unwillingness to reach a deal. I also insisted that they negotiate in good faith,” Genachowski said in a statement e-mailed to reporters. He also said he was “deeply troubled” that the companies have spent more time attacking each other through lobbyists and ads than in negotiations. “The time for petty gamesmanship is over.” Meanwhile, Sen. John Kerry, D-Mass., sent Genachowski a copy of a draft bill that would implement many of the changes some pay-TV distributors want made to the retransmission consent rules.
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Genachowski’s statement and actions appear to be a reaction to pressure from Congress, a cable attorney said. Beyond the Kerry draft bill, New Jersey Sens. Frank Lautenberg and Robert Menendez, both Democrats, asked the FCC to quickly step into action this week. Genachowski’s statement Tuesday is more of a political statement than barometer for where the commission stands on changing the retransmission consent rules, the lawyer said. “If the commission wanted to do something they would have done it already,” the lawyer said. “And they've had vehicles to do so. They've just decided not to.”
Kerry plans to introduce his retransmission-consent legislation in the lame-duck session starting Nov. 15. Under the bill, TV signal transmission would continue unabated while the FCC evaluated a dispute. Kerry may have a hearing on the subject, a Senate staffer said. It could occur on Nov. 17, said two industry officials.
"It’s not our job to take sides, but it is our responsibility to help find a better way forward,” Kerry wrote in a letter Tuesday to FCC Chairman Julius Genachowski. “The goal of this legislation is to offer a path towards resolution that reforms a broken system and protects the consumers who get caught in the middle.” Kerry said the commission “has had sufficient time to consider comments” on retransmission consent and start revising rules. “But in the absence of FCC action, I feel a responsibility to begin to consider the smartest, least intrusive actions to reform the law.” An FCC spokeswoman declined to comment on the bill.
The bill would give the FCC power to require arbitration and issue fines to companies in retransmission consent disputes. After the expiration of a carriage agreement, the distributor would continue carrying the broadcaster’s signal on the same terms of the expired agreement. Each party would be required within 10 days to submit its last best offer to the FCC, which would assess whether each party was negotiating in good faith and making offers consistent with current market conditions. The bill would require the FCC to make a determination within 20 business days after the carriage agreement’s expiration. The proposed law would not preclude the parties from continuing their own negotiations.
Kerry’s draft bill prescribed specific resolutions for four different impasse scenarios. If the FCC found “the broadcaster was negotiating in good faith and making an offer consistent with market conditions but the distributor is not,” the distributor would have to agree to the broadcaster’s last best offer or terminate carriage, and the FCC could fine the distributor, Kerry said in the letter. The broadcaster could withdraw its last best offer and ask the FCC to require binding arbitration. Conversely, if the FCC decided the broadcaster was the bad actor, the FCC could require binding arbitration.
If the FCC found neither party was negotiating in good faith, it could require binding arbitration and fine both parties under the bill. If the FCC found that both parties “negotiated in good faith but reached a true impasse based on an honest disagreement on the value of the signal,” the commission could “request” the parties to enter arbitration, Kerry said. If one refuses to arbitration, the FCC would provide companies a “model notice” for the companies to send to consumers. The notice would “inform consumers of the potential loss of service as well as the difference in offers on the table so that consumers can judge for themselves who was making the fairest offer,” Kerry said.
The broadcasting and cable industries kept quiet Tuesday on Kerry’s draft bill. NCTA declined to comment. Fox and Cablevision, currently embroiled in a retransmission fight, didn’t respond to requests for comment on it.
Fox and Cablevision again failed to make progress toward ending the carriage dispute that has deprived some 3 million New York and New Jersey-area cable subscribers of Fox programming, Fox said Tuesday afternoon. The companies spoke briefly by phone Tuesday and agreed to continue discussions Wednesday, Fox said. The broadcaster also charged Cablevision with “hypocrisy” for calling for government intervention and arbitration in this case as its one-time corporate sibling Madison Square Garden Inc. has fought off similar calls by Dish Network in a carriage dispute over its regional sports networks in New York. Cablevision defended its position. “By now it should be clear even to [Fox owner] News Corp. that binding arbitration is the fastest and fairest way to return Fox programming to our customers,” a Cablevision spokesman said.
The NAB said the retransmission consent system has only broken down because one party is looking for government intervention, rather than devoting its full attention to reaching a negotiated agreement. “We don’t have a broken system; we have a broken pay-TV company that likes to play Washington games,” an NAB spokesman said. Fox has an added incentive take a tough line against Cablevision because its retransmission consent agreements with Dish Network expire at month’s end, said Gimme Credit analyst Shelly Lombard. A higher rate from Cablevision could “set the tone” for a bigger contract from Dish, she said.