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Summary:

The FCC issued a Notice of Proposed Rulemaking yesterday, seeking to reform the rules around retransmission consent negotiations. While the proposal could clarify the concept of “good faith” negotiations, it does little to improve the FCC’s ability to act if parties aren’t negotiating in good faith.

FCC Chairman Julius Genachowski

After a year filled with high-profile TV blackouts, the FCC is finally looking into updating rules that apply to broadcasters and pay TV operators as they negotiate retransmission deals. But while its latest Notice of Proposed Rulemaking seeks to clarify the Commission’s ability to regulate retrans consent discussions, the proposed changes still won’t give it much power to act when negotiations go bad and TV signals go dark.

It’s clear the regulator needs to do something — after all, 2010 was a record year for TV blackouts on cable systems, with more broadcast signals going dark than in any other year previous. Some of those blackouts were centered around popular live events: early last year, ABC went dark on Cablevision systems, causing subscribers to miss the first 15 minutes or so of the Academy Awards. A later retransmission spat between Cablevision and Fox Broadcasting left viewers unable to watch the network for two weeks during MLB’s National League Championship Series and some games of the World Series.

But during those standoffs, the FCC had little power to ensure all parties involved were actively working to settle these disputes. And what power it did have was centered almost entirely around its ability to fine companies for “not negotiating in good faith.” But as we wrote during the Fox-Cablevision dispute:

“Unfortunately, there’s not much that the FCC can do in this situation to get both sides back to the negotiating table. If it finds that one or either side are not operating in good faith, it could levy a fine against them. But given that the stakes are so high — Fox is reportedly seeking up to $150 million for retransmission of its broadcast signal — the fine would have to be pretty hefty to dissaude the parties from acting up.”

Notably, the Cablevision-Fox spat didn’t get resolved for another week after the FCC stepped in, and it wasn’t because the regulator was able to bring them back to the negotiating table. Despite an FCC inquiry, both Cablevision and Fox declined to call each other out for not negotiating in good faith, leaving the regulator unable to act.

The FCC is seeking to address this issue with a new Notice of Proposed Rulemaking that would give it more power in similar situations. But while the commitment to retrans reform is a step in the right direction, the proposal as put forward is still limited in the tools it could give the FCC to actually regulate retransmission discussion.

Much of the proposal is focused on clarifying what constitutes negotiating in “good faith” and how those negotiations — and the FCC’s ability to act if a party is not found to be acting in good faith — would be defined. Indeed, the “Strengthening the Good Faith Negotiation Standards” section of the document takes up the bulk of what the Commission seeks comment on.

But what’s most notable about the proposal is not what’s included, but what’s missing: In light of the blackouts that plagued the industry last year, many cable companies called for the FCC to introduce binding arbitration or interim carriage requirements that would keep signals on the air even if the parties couldn’t come to an agreement. But the proposal leaves both options completely off the table. According to the FCC: “In light of the statutory mandate in Section 325 and the restrictions imposed by the ADRA, we do not believe that we have authority to require either interim carriage requirements or mandatory binding dispute resolution procedures.”

Clarifying the FCC’s view of what constitutes good faith in retransmission negotiations, and its ability to act if one party or another is not acting in good faith, could help to establish more clear boundaries for it to step in during blackouts. But without the ability to force arbitration or some other means of ending retransmission disputes, the Commission will still likely be powerless to act, even if one party or another isn’t negotiating in good faith.

Also worth noting is that regardless of what the final outcome is, the FCC’s rulemaking with regard to retransmission consent is unlikely to be resolved anytime soon. Commissioners even acknowledged as much, with Robert McDowell raising a “cautionary flag” for any pay TV operator or broadcaster that might be engaged in active discussions during the comment period:

“[T]hose of you who are working on retrans deals in 2011 and beyond should stay seated, and engaged, at the bargaining table, and reach a deal on your own. Don’t use the mere existence of this Notice as an excuse to stop negotiating and reaching deals. Please don’t expect the government to resolve any disputes for you.”

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  1. They could drop the mandatory carriage clause that make it an unlevel negotiating situation.

    For now cable companies are required by law to cave on retransmission if it is part of a bundle for local stations. Thus Disney or Comecast will be able to force retransmission companies what they like and then play hardball until they get the deal they want because the retransmission companies are required by law to carry local stations for emergency services.

  2. They could rule for reform…or people could take matters into their own hands and drop pay tv during these standoffs. These issues wouldn’t exist if viewers (aka voters) didn’t feel they needed pay services. Anyone notice that the stations never alert viewers that they can use an antenna and digital tv (or converter box) to view their programming? Maybe THAT is what should be addressed. On the other side of that, there is a reason lifeline packages are mandatory. Perhaps they should find some way to say that loss of any station’s signal in that service requires a discount for the term of the loss. I bet we would see some really good negotiations then.

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