FCC Reviewing Cablevision, Fox Responses with Eye to Possible Fines
Career FCC staffers are reviewing responses from Cablevision and Fox to see whether negotiations that led up to a carriage blackout that’s in its 12th day were done in good faith, agency and industry officials said. They said Media Bureau staffers are reviewing the responses received late Monday from the companies on their retransmission consent dispute (CD Oct 26 p8) to determine whether to fine either or both if they're found to have acted in bad faith. If the bureau finds that FCC rules on retrans talks were broken, it could have the policy basis to order interim carriage. Because the bureau still lacks a complaint, it may not have statutory authority to order Fox’s three stations in the New York and Philadelphia areas back onto Cablevision, agency and industry officials said.
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Heightening the dispute Tuesday, Fox charged that Cablevision is encouraging its cable subscribers who also have broadband to engage in piracy by viewing Fox programming on unauthorized websites. It’s the second broadband issue that has arisen in the impasse. Earlier, News Corp. blocked Hulu, the video website it owns a stake in, and Fox.com from sending Fox programming to Cablevision broadband subscribers (CD Oct 19 p5). Fox’s new allegations were based on a New York Daily News report that a Cablevision customer service representative told a caller to get professional sports video from websites that don’t have the rights to distribute the games.
"Cablevision employees are referring customers to illegal, and perhaps criminal, web sites from which customers can allegedly watch unauthorized programming” from News Corp.’s WNYW New York and WWOR Secaucus, N.J., a lawyer for Fox wrote Cablevision CEO James Dolan. “Directing customers to illegal web sites that steal Fox programming constitutes copyright infringement by Cablevision because Cablevision is inducing and materially contributing to the infringing activities of these illegal web sites. We demand that you immediately cease this activity."
"This is an obvious tactic from News Corp., which blocked the Internet, to shift focus away from their pulling the plug on 3 million New York households,” a Cablevision spokesman said. “Fox should cease and desist its World Series blackout, put its programming back on Cablevision and agree to binding arbitration.” Fox has resisted legislators’ requests for arbitration.
Back at the FCC, staffers were starting their review of Cablevision and Fox letters to bureau Chief Bill Lake, responding to his request Friday to detail whether retrans talks were held in a spirit of honesty (CD Oct 25 p1). Staffers in the bureau and in the office of Chairman Julius Genachowski are scrutinizing the responses, agency officials said. Their review doesn’t seem to be near completion, but they're keeping an eye on whether either party wasn’t forthright in the retrans talks, because that could give the bureau a lever to order carriage, agency officials said. Cablevision and Fox got an additional 24 hours to reply to the initial letters from Monday, and those responses will be posted to www.fcc.gov, a bureau spokeswoman said. “We will review the submissions and continue to monitor the situation.” Cablevision’s initial submission is at http://xrl.us/bh5rne, Fox’s at http://xrl.us/bh5rng.
The bureau first would need a good-faith complaint from Cablevision, which hasn’t made one, or it would need to find that the cable operator’s response, in which it asserts bad faith by Fox, constitutes a complaint, FCC and industry officials said. Even without a complaint -- and possibly without a vote by commissioners -- the bureau could fine either side if it finds they didn’t negotiate honestly, agency and industry officials said. They said such a penalty could apply to the first 10 days of the blackout and likely would be below the dollar amount of penalties that the commissioners usually vote to approve instead of the agency delegating their issuance to bureaus.
The purpose of Lake’s fact-finding request seems to be to give the FCC documentation of lack of good faith in order to pave the way to order carriage, said commission, broadcast and cable officials. The longer the impasse goes on, the greater the chances that Lake will take steps to order interim distribution, they said. “It appears that the commission’s only club in the bag is good faith, and I think Bill is using that to the maximum extent he can,” General Counsel Jerald Fritz of Allbritton Communications, which owns seven TV stations that aren’t involved in the dispute, said of Lake.
TV lawyer John Hane of Pillsbury Winthrop said he “wouldn’t be surprised to see the FCC open a complaint proceeding,” he said. Lake’s letter to the sides Friday “all but begged” Cablevision to make a complaint, and the company “basically did, without calling it that,” he said. “But I don’t think the Media Bureau would actually try to resolve a complaint,” he predicted. “It would just use the proceeding to prod the parties and to show it’s trying to do something. They'll ask for information and meetings and let the proceeding drag out until negotiations conclude, Cablevision will then withdraw the complaint.”
"Are they now the police looking out for bad faith, and when they see it they will enforce” the rules, or does the commission need a trigger to act, asked a cable lawyer. “Cablevision of course could make a complaint. But there’s risk” that it could be dismissed and so increase pressure on the cable operator to reach a deal with Fox, the lawyer added. Under FCC rules, it seems the most the agency can do without a complaint is issue fines, said a lawyer with broadcast and pay-TV clients not involved in the dispute.
If Dish Network and Fox can’t reach a deal by the Oct. 31 expiration of their current retrans contract, “that could be a game changer in terms of members of Congress understanding what’s at stake in retransmission disputes or negotiation,” a cable attorney said. Dish and Fox executives haven’t begun briefing commissioners or their aides on the companies’ progress toward reaching a new deal, agency officials said. From what executives of Cablevision and Fox are telling FCC officials, a settlement of their dispute doesn’t seem near, agency officials said.
The regulator doesn’t seem poised to act on retrans in general, agency and industry officials said. They said it’s unlikely to issue soon a rulemaking notice on a petition from 14 pay-TV providers and nonprofit groups seeking changes in the way the agency handles the disputes and proposing additional rules on subscriber notification before those disputes occur. “A variety of considerations tend to conspire against any significant change in retransmission consent/must carry policy in the near term at least,” analyst Jeff Silva of Medley Global Advisors wrote investors late Monday. “Any effort to rebalance retransmission consent/must carry policy could remain politically challenging even after the dust settles in the midterms, and any FCC action in the Fox-Cablevision dispute that goes beyond bully pulpit-browbeating could be legally vulnerable if challenged in court.”