ATSC 3.0 Seen as New Retrans Hiccup; No Major Retrans Reforms Seen Soon
ATSC 3.0 is proving to be a complication in the current cycle of retransmission consent negotiations, with some stations potentially deploying the next-generation standard over the next three years, an FCBA CLE heard on the eve of FCC members 3-2 OK'ing the standard (see 1711160060). One complication on retrans is no one knowing what the new system will look like, said broadcast lawyer Dan Kirkpatrick of Fletcher Heald. He said lack of clarity makes negotiating for rights or compensation challenging. Broadcast lawyer Jack Goodman said implementation will change retrans negotiations dynamics, since standard contractual language now says broadcasters can't use cable operators' interactive plant, but one promise of 3.0 is interactive programming.
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Cable and broadcast -- always facing off in retrans negotiations -- were at odds at the Wednesday evening event on the state of retrans and the effectiveness of the retrans regime. The retrans rules enacted with the 1992 Cable Act weren't expected to affect consumer pricing or involve networks, just local broadcasters, but today it's "a distorted competitive environment," with broadcasters having unchecked abilities to coerce higher and higher retrans fees, said cable lawyer Barbara Esbin of Cinnamon Mueller. Retorted Goodman, the retrans regime “worked very well” to meet congressional intent, which was a revenue transfer from cable to broadcasters who weren't getting paid for their signals. Retrans is an issue in media consolidation, as a split FCC OK'd ownership deregulation Thursday (see 1711160054). Commissioner Mignon Clyburn tweeted during the meeting "#Retrans fees are up year-over-year by as much as 162%. Seems rolling back #mediaownership rules is just another gift to big #broadcasters."
Much of the face-off involved who truly has leverage in talks. Broadcasters, said Esbin; MVPDs, said Fox TV Stations Senior Vice President-Legal and FCC Compliance Joseph Di Scipio; big operators, be they broadcast or cable, said Goodman. Esbin said some broadcasters in the current negotiation cycle are asking for triple-digit retrans fees increases. “Are they asking or are they getting?” Goodman said. Di Scipio said it's unlikely anyone would get that type of increase, noting higher program costs are hitting broadcasters.
Standoffs and blackouts have grown over time as demands for price increases have grown, Davis Wright cable lawyer Cristina Chou said. She said pricing was driven by new MVPD entrants -- first direct broadcast satellites, then telcos -- each giving broadcasters a chance to leverage one MVPD against another. Retrans talks in the early years of the rules regime were about noncash issues like carriage of affiliated channels -- due to cable's hard-line stance -- but today, the negotiations largely involve cash, said Kirkpatrick. He said noncash items like advertising guarantees still come up, but “cash has overtaken that.”
There's openness to changing MVPD carriage rules, "but it can't be piecemeal," Goodman said. The FCC under former Chairman Tom Wheeler didn't go anywhere with its examination of modifying the totality of circumstances rules (see 1607140047) because of the interplay of video carriage and copyright rules. "What you can't do is pull this thread, retransmission consent, out," he said, saying many retrans rules changes often pushed by MVPDs, like rules limiting blackouts, are intended to stack negotiations in MVPDs' favor.
Any major changes would require referrals to two congressional committees, and passing legislation through two in the current political environment "is nigh impossible" and would require "an incredible level of leadership," Goodman said. Esbin said the FCC has options of its own for some modifications on the margins, using still-open proceedings. She also talked up the Local Choice Act introduced in 2014 by then-Sen. Jay Rockefeller, D-W.Va., and current Senate Commerce Committee Chairman John Thune, R-S.D., as a good fix. Goodman pooh-poohed it as opening the door to rate regulation.