Legal Authority, Regulatory Overstep at Center of 3-2 Split on Programming NPRM
Charter Communications' buys of Time Warner Cable and Bright House Networks were cited repeatedly Thursday as rationale for and a warning against FCC 3-2 approval of an NPRM that would limit pay-TV providers from including "unconditional" most-favored-nation and "unreasonable" alternative distribution method terms in carriage contracts with independent programmers. Pointing to ADM and MFN conditions in the Charter approval, Commissioner Mignon Clyburn said such contractual terms "are what independent programmers face each and every day," and such terms unduly limit their businesses. Commissioners Ajit Pai and Mike O'Rielly both said they objected to the Charter conditions because the transaction approval was a first step to those conditions becoming industrywide rules.
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"Less than five months after that vote, here we are," Pai said. He also said usage-based pricing conditions on the Charter deals could be something the agency tries to impose more broadly. The NPRM vote along party lines was expected (see 1609270040).
Clyburn, who spearheaded the proceeding, said she was unsure what path the diverse and independent programming notice of inquiry early this year would lead to. Clyburn said the NPRM invites comment about potential recourses for consumers when a favorite channel is dropped but the prospect of changing pay-TV providers means paying stiff cancellation penalties. Indie programmer RFD-TV lobbied the FCC on limiting early termination fees when multichannel video programming distributor drop programming (see 1609200038). Media Bureau Chief Bill Lake said the NPRM also asks about the effects of bundling practices on carriage of independent programmers.
Pai said the NPRM was emblematic of the end of 5-0 votes on NPRMs, with commissioners no longer able to add questions or suggest edits and the end result being one-sided documents. He said "the vast majority" of his edits and suggestions were ignored, leaving "an order masquerading as a notice." Pai said one of his chief concerns was unintended consequences and whether restrictions on ADMs and MFNs might see indie programmers facing a tougher time rather than an easier one getting carriage by an MVPD -- a sentiment O'Rielly echoed. O'Rielly said the NPRM "improperly jumps in the middle" of distributor/programmer carriage relationships and private negotiations.
Pai questioned whether the FCC has authority under Section 616(a) of the Cable Act to limit ADMs and MFNs. "I have my doubts," he said, since 616(a) contains six guidelines for carriage agreement rules and the agency has never issued rules under it that go beyond the six. He contrasted it with Section 628(c) on competition and diversity in video programing distribution, where Congress clearly was indicating the rules set out there are a "floor" for FCC authority.
The NPRM does ask about what authority the agency has under Section 616(a) of the Cable Act, which covers carriage agreement regulation, said the FCC. The question of whether the FCC has statutory authority "floors me," Public Knowledge Senior Vice President Harold Feld told us afterward.
The agency is required to prevent cable operators from conduct that unreasonably restrains unaffiliated video programing, Chairman Tom Wheeler said, saying it's questionable whether there's "anything reasonable" in unconditional MFNs and unreasonable ADMs.
The American Cable Association in a statement said it was "especially glad" the NPRM also solicits comment on bundling practices. "It is undeniable that large programmers and broadcasters require small cable operators to carry dozens of unwanted networks that hog limited bandwidth that could be allocated to independent programmers," ACA said. "These programmers' bundling obligations also exhaust small cable operators' programming budgets, leaving them with no money for independent programmers."
The ADM and MFN measures "would make it easier for independent programming to reach more consumers and discover new business models to fund the creation of even more programs," PK said in a statement. “The FCC has been working diligently to create a better video marketplace for both independent programmers and consumers. These proposed rules mark a significant step in the right direction."