Battle for Video Marketplace Changes Caught Between STELA, Communications Act Overhaul

For months, pay-TV lobbyists have requested several changes in STELA -- such as updating retransmission consent rules, which have faced heavy criticism after recent contentious retrans negotiations and subsequent blackouts. Some stakeholders argue retrans now is very different from when the regime was enacted in the 1992 Cable Act, but NAB has defended the rules repeatedly and insists they work as intended. Broadcasters want what they call a clean bill, narrow and not touching such bigger issues, which they say should be addressed in the proposed update to the Telecom Act in future years.

The Telecom Act overhaul and STELA reauthorization pose a “danger” to broadcasters, with STELA now “a vehicle to alter retrans,” warned Preston Padden, a former ABC TV network president. “We do not need to renew the satellite compulsory license at all,” Padden told us, speaking on his own behalf as an adjunct law professor at the University of Colorado Boulder and not for the broadcaster coalition he represents on FCC incentive auction issues. “Broadcasters will lose some retrans rights in this round of STELA,” and then more in the next, and so on, Padden said. These reauthorizations are “always an opportunity for bad things to happen to broadcasters,” he said. “The pressure on retrans is greater this renewal cycle."

'Blackmailing,’ Fields Says

"I was the Republican who was the co-sponsor for retransmission consent in the ‘92 Act, and if we went back to 1992, based on what broadcasters have done in terms of increasing their charges, which have a very detrimental effect on the price that consumers have to pay, I would not have been that co-sponsor,” said former Rep. Jack Fields, R-Texas. “We didn’t intend for broadcast stations to go dark when the Super Bowl or the Academy Awards” are on “as a negotiating tactic,” he said of what he called “basically blackmailing."

A former House Communications Subcommittee chairman and now CEO of the Twenty First Century Group lobbying firm, Fields lambasted “antique” video rules. His clients include Time Warner Cable and Verizon, although he said he’s “not trying to take the side of cable” in criticizing the retrans regime. “Broadcasters do have a property and they have a right to negotiate and be commercial with that property,” Fields said, while calling for a broad review of many video market rules similar to what he and other lawmakers did in 1995 and 1996, in overhauling the 1934 Communications Act. “Cable companies should be able to bring signals from distant places in,” Fields said, criticizing the requirement that cable operators include stations in the basic tier. Fields wouldn’t say whether Congress should make these changes as part of STELA but pointed out that House Communications Subcommittee Chairman Greg Walden, R-Ore., has indicated a desire for keeping the legislation “fairly normal and push some of the major issues into 2015 and 2016.”

"What do you expect Jack Fields to say? He’s a hired D.C. gun for Time Warner Cable and has pocketed more than $1.1 million since 2010 from pay-TV companies,” an NAB spokesman told us in response. “If you want to know why pay-TV rates are rising, don’t look at the modest retrans fees that broadcasters are receiving, which account for just 2 cents on the cable dollar. Look at the millions Time Warner Cable showers on Washington lobbyists and consultants who are manufacturing a phony crisis so they can avoid paying fair market rates for the most-watched programming.”

The American Cable Association is “focusing on STELA,” said Vice President-Government Affairs Ross Lieberman. ACA has approached STELA reauthorization in a “pragmatic” way that recognizes the political realities and the push from other interests for a clean STELA, said Lieberman. He outlined ACA’s focus on other changes, such as broadcaster joint negotiation. “Irrespective of the Communications Act update, ACA recognized that there was only so much that was going to get done on STELA,” Lieberman said.

Despite intense lobbying from some MVPDs, Congress shouldn’t address retrans rules in such a “time-limited proceeding” as STELA, said former FCC Wireless Bureau Chief Fred Campbell. “It’s hard to understand what’s going on here in a short time.” Campbell, who now heads a nonprofit-funded policy group called the Center for Boundless Innovation in Technology, defended current retrans negotiation rules and argued STELA has strayed from its purpose. “A lot of the proposed revisions have nothing to do with satellite carriage,” Campbell said, emphasizing how MVPDs want to turn STELA into “a vehicle” for their desired changes. Campbell slammed pay-TV industry arguments against retrans as “straw men” and wondered if something else may be fueling the lobbying. “You know what is here -- a whole lot of ad revenue,” Campbell said. He speculated that MVPDs may be attacking broadcasters in “a lot of collateral ways” to weaken them. Retrans consent is working as intended, with economics suggesting the reason that fees rose in recent years is a market shift from cable monopoly to competition, Campbell said. His funding doesn’t include broadcasting or telecom nonprofits or companies, nor does he now consult for broadcasters or broadcast associations, he said.

Broadcasters Afraid

Broadcasters are slowly coming around to the idea that they will be safer in a world stripped of compulsory licensing, Padden said: In “the world I envision, broadcast stations would negotiate with cable and satellite exactly the same way cable stations do today.” Padden praised NAB for doing “a great job under difficult” conditions, pointing to recent “miracles” worked under NAB Executive Vice President-Government Relations Kelly Cole; broadcaster opposition is already said to have killed an initial STELA draft provision that would have let cable operators remove broadcast stations from the basic tier. Between Congress and a “hostile” FCC, broadcasters are “under the gun,” Campbell said.

"'Clean’ means keeping other people’s stuff out of it,” said Free Press Policy Director Matt Wood. Past satellite reauthorizations have included some video market changes, Wood said, pointing to the provision requiring good-faith retrans negotiations added in a past reauthorization.

But Campbell said add-ons create a risk that STELA won’t get reauthorized at all or that it will lapse, and Wood mentioned how during the last reauthorization process, Congress required an extension because it couldn’t reauthorize the law in time. Observers all highlighted the challenge of getting STELA through four committees of jurisdiction: Commerce and Judiciary in both chambers. Wood has testified before Congress on STELA multiple times in recent months, largely due to Free Press’s concerns and interest in STELA’s add-ons, he said, rather than in the core STELA reauthorization issues. Wood questioned an initial theory among some pay-TV lobbyists that House Republicans began a comprehensive telecom update in December as a way to keep STELA clean this year. “If there was an attempt to make the rewrite more of an escape valve,” then it wasn’t borne out by the House Communications Subcommittee STELA draft this spring, which was “not itself strictly limited,” Wood said. Walden, at least, will likely “keep things focused and not expand” unless “things change,” Fields predicted.

"There’s never been a ‘clean’ STELA reauthorization,” ACA’s Lieberman said, naming tweaks included in prior reauthorizations, such as extending the good-faith negotiation provisions to include cable or to change copyright rules that apply to cable. Lieberman sees nothing “irregular” in pay-TV industry requests for certain changes becoming part of this bill. That said, Lieberman acknowledged the practical approach in “too many controversial items” potentially weighing down must-pass legislation that many hope will pass Congress by the end of the year.

Fields underscored the Aereo case, currently awaiting decision before the Supreme Court, as a “major game-changer” that could shift the whole dynamic of what goes in STELA or in the Telecom Act update. “When you have this Aereo case, I think all that’s going to percolate to the top,” Fields said of video market issues. Capitol Hill will see a storm of action if the startup Aereo prevails in arguing it can transmit broadcast signals online without paying broadcasters, Fields imagines. “Broadcasters who have been so slow to change, if this Aereo decision happens, I think these guys, the broadcasters, are going to go into fast forward, looking for some type of legislative fix,” Fields said. “They could be in a very, very difficult situation. I think the Supreme Court is going to decide on the side of Aereo.”