FCC Votes to Open Retrans NPRM

In a unanimous vote this afternoon, the FCC agreed to open a Notice of Proposed Rule Making (NPRM) related to the issue of Retransmission Consent. Recently a hot button topic as a result of several high profile disputes, the FCC’s concern with retransmission consent comes on the heels of a congressional hearing on the matter. While commissioners differ on the degree of actions that should be taken, all agree that adherence to the seven good faith standards in the rules are paramount.

To be sure, no new rules were adopted at this meeting; this was merely a vote to look into the matter and to hear from all of the concerned stakeholders; broadcasters, MVPDs and consumers. More than one commissioner warned that no parties to any negotiation should read into the NPRM any likely outcome, nor should anyone use the NPRM as a delaying tactic in their negotiations. The standards of good faith negotiation still stand. After all, the commission could go through the process and decide to do nothing – kind of like looking at the desert tray and just ordering coffee.

What does it mean for the industry? This is one more chance for all interested parties to go on record. If you are a broadcaster, the process works fine as a vast majority of retransmission consent negotiations are completed quietly and without incident. If you are a cable operator, the process is broken and the smaller a cable operator you are the worse it is broken. No doubt the ACA will be prepared to show that smaller cable operators pay a disproportionate higher rate as the result of MFN’s and weaker relative market leverage. The commissioners even specified that they want to hear from organizations that represent consumers too.

Make no mistake, retransmission consent will not be going away – that will require an act of congress. It is expected that the main focus of the commission will be to find a way to keep the signals available to consumer while cable ops and broadcasters hash out their deals and to find away to prevent consumers from being “held hostage” by the process.

In a related note, Comcast and Sinclair announced a “multiyear agreement-in-principle” for the carriage of 36 stations in 22 markets.

Retrans Rhetoric Heating Up

This week sees the formation of the American Television Alliance (ATA), a consortium of multichannel providers with a goal of raising awareness and ultimately changing policy on retransmission consent. Among the “strange bedfellows” in the ATA are Time Warner Cable, Direct TV, Cablevision and AT&T – companies that often compete against each other for multichannel subscribers, and in the case of Cablevision and AT&T, fight over access to and pricing of programming (but that’s for another day). A large part of the argument made by the ATA is that retransmission consent is essentially a consumer issue since any payment made by cable operators to broadcasters are ultimately passed on to the subscriber.

Predictably, the National Association of Broadcasters (NAB) scoffed at the ATA’s consumer rights stance, with an NAB spokesman berating it “as credible as BP executives joining Greenpeace”.

The rhetoric on both sides of the issue is just about as predictable as Keith Olbermann and Glenn Beck discussing the economy. Both sides passionately make valid points filtered through their own lenses. There is no doubt that the broadcast business model is changing and that cable operators have long benefitted from the carriage of local broadcast signals. However, cable operators are increasingly coming under pressure to keep rate increases in check and have even renewed an industry conversation on smaller and cheaper programming packages. All of this comes at a time when viewer options are expanding and much of the broadcast programming is finding its way to the web for free (Hulu’s premium aspirations notwithstanding). However, for the broadcasters to paint the formation of the ATA as an effort to do little more than protect the bottom line of the operators is a bit disingenuous given the boasting that NAB member companies have been doing on their quarterly calls about how much retrans dollars are contributing to their profits.

At the end of the day, retransmission consent is a consumer issue. It is one more cost that cable operators need to either absorb or pass along. Very often, these kinds of disputes turn into high profile corporate pissing contests, where the consumer is the one who ultimately gets soaked.

But really, is it wise for either side to be airing their grievances in public? Do viewers really need or want to peek into the “sausage factory”? I don’t think so. At the end of the day, viewers are not interested in the disagreements of corporate behemoths. Don’t ask them to take sides or get involved in the details or you may find they have little appetite for supporting either company in an argument over money. They just want to turn on their TV to get relevant entertainment and information without having to pay a whole lot of money to be advertised to in the process. But on the other hand, they do have a right to know why they might be losing access to their local news broadcast.

There is no doubt that both sides are preparing the battlefield and oiling the guns for upcoming renewals. The heightened rhetoric by both sides will certainly draw increased scrutiny from Washington should any of the negotiations get close to failing or actually fall apart and result in TV stations going dark on cable systems.

As with anything involving legislation, this is very much a matter of being careful what you wish for. The issues of Retransmission Consent and a la carte programming have been raised by legislators and interest groups in the course of the Comcast-NBCU merger hearings. Granted, what Retransmission Consent has turned into may indeed have been an unintended consequence of the 1992 Cable Act (which, by the way, was the result of Congress overriding a presidential veto), but can you really expect that the people who gave you the problem have any idea of how to fix it?