More Muscular Retrans Enforcement Stance by FCC Seen by Some
The FCC might have opted not to change the rules for retransmission consent negotiations, but it could be signaling more willingness to intercede when those talks are going awry, some cable industry officials and allies tell us, pointing to Sinclair’s $9.49 million settlement (see 1607290067) last week over an array of good-faith negotiating and licensing rule violations. But other multichannel video programming distributor allies -- plus broadcasters -- see that idea as wishful thinking. The agency has broad statutory authority to investigate and impose penalties, but the question of whether the Sinclair consent decree is a turn in FCC enforcement policy remains to be seen, one lawyer who represents cable interests told us.
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The significance of the Sinclair enforcement action is that it's a first for the FCC, with the Media Bureau both investigating and securing a consent decree for a retrans violations untethered from a formal complaint, emailed American Cable Association Senior Vice President-Government Affairs Ross Lieberman. “That invites and sets precedent for future commissions, future bureaus to do the same thing.” The possibility of such agency action could be a "moderating force” over broadcaster practices in future negotiations with MVPDs, he said.
FCC Chairman Tom Wheeler, announcing last month the agency wouldn’t be adopting any additional rules governing good-faith negotiations (see 1607140047), said the commission is “prepared to use the authority Congress has conferred … to help to bring negotiations to a conclusion.” The FCC “do[es] not need one of the parties to a negotiation to cry foul before acting in the public interest [and] can investigate a potential good faith violation on its own and take enforcement action when a party fails to fulfill its statutory obligations,” Wheeler said in his blog post. That language points to the agency operating “in the middle” between the regulatory environment before issuance of the NPRM and one with more prescribed rules that many MVPDs had hoped to see emerge from the NPRM process, Lieberman said.
When asked about the likelihood of further actions like the Media Bureau's investigation of Sinclair, the FCC pointed to a comment by bureau Chief Bill Lake that the Sinclair consent decree "demonstrates our strong commitment to vigilantly enforce our retransmission consent rules when necessary.”
One cable industry official said retrans complaints against broadcasters are rare because they could take months to adjudicate and in the meantime the lack of that broadcast signal is hurting business. That the FCC is perhaps indicating it might take a different investigation and enforcement tack could change the retrans dynamic with broadcasters, who now might have to be more concerned with FCC action even without MVPD-lodged complaints, the cable official said.
The Sinclair consent decree wasn't about typical good-faith negotiations and determining fairness but specifically regarding alleged violation of an FCC rule on joint negotiating, said Cooley law firm partner David Wittenstein, who does retrans negotiation work for MVPDs. So the Sinclair case likely doesn't signify the agency is more willing to get involved in the inner works of retrans negotiations than it has been, Wittenstein said. Instead, it's more likely the agency will continue to get directly involved in the types of negotiation impasses it has in the past -- high-profile impasses involving lots of subscribers or major markets or marquee events, he said. In those cases, he said, "You can count on the commission to pull the parties into a room ... and jawbone them and try to reach an agreement." But there's nothing indicating the FCC is any more likely to get involved in the nitty gritty of contract provisions or prices, he said.
One broadcast industry official called the complaint-less enforcement notion “fantasy thinking” by MVPDs who tried to manufacture a retransmission crisis “only to lose badly” at the FCC. The Sinclair action proves no retrans rule changes are needed, with the FCC able to deal with problems “on a one-off, piecemeal basis” instead of broadly disrupting the current negotiation regime, the official told us, saying broadcasters generally think the FCC didn’t take action on good-faith negotiation rule changes because some pay-TV providers have been “serial abusers” of the process by not negotiating fairly and forcing disruptions. The result was the FCC didn’t want to reward that, the broadcast official said.
Several broadcast attorneys told us they don't think the settlement foretells much change in FCC treatment of good-faith negotiation violations. It's impractical to expect the agency to be able to monitor such deals, one broadcast lawyer noted. How will the commission know negotiations are occurring? one attorney asked. Several industry lawyers said Sinclair was an outlier in negotiating on behalf of stations with which it was engaged in sharing arrangements. Many broadcasters stopped such practices after the FCC targeted joint negotiation, but Sinclair persisted, several attorneys said. Sinclair did so because of a disagreement between the broadcaster and the FCC over how the rules defined joint negotiation, broadcast attorneys told us.
“The FCC did not find Sinclair to be at fault in connection with any of the matters addressed in the Consent Decree, nor did Sinclair admit any liability with respect thereto,” said Sinclair in a news release. Joint negotiation on the scale addressed by the consent decree is unlikely to come up again, attorneys told us.
Along with complaints about negotiations, Sinclair's consent decree payment resolved outstanding issues of the company's sharing arrangements, and coincided with withdrawal of complaints against Sinclair from Dish Network (see 1607290042) and the Rainbow PUSH Coalition. The complaint concerned Sinclair doing business on the behalf of companies identified as separately owned. Multicultural Media, Telecom and Internet Council Senior Adviser David Honig, who represented Rainbow PUSH in the proceeding against Sinclair since the late 1990s, said he was informed of the consent decree and withdrew the complaint because the large settlement resolved the issue.
The sweeping consent decree and the resolution of so many older proceedings were seen by some broadcast lawyers as an effort by Sinclair to facilitate a transaction approval or possibly prepare for an ATSC 3.0 order. But the FCC made the first move, one attorney noted. Sinclair's settlement was part of FCC efforts to clear a backlog of unresolved proceedings, a broadcast attorney with knowledge of the matter told us. The Media Bureau approached Sinclair well over a year ago, seeking to resolve the outstanding items so the bureau could issue license renewals for the broadcaster, the attorney said.Sinclair does have a pending transaction on file with the Media Bureau, connected with the larger Nexstar/Media General transaction, a bureau spokeswoman told us.