Reforming retransmission consent.

• Author: Burton, Meg

1. INTRODUCTION II. RETRANSMISSION CONSENT III. THE CURRENT DISPUTE: WHAT EACH PARTY WANTS A. Cable Providers B. Broadcasters C. Consumers IV. POSSIBLE SOLUTIONS A. FCC Proposals 1. Improving Good Faith Standards 2. Revision of Notice Requirements 3. Extending "Sweeps" Prohibition to Non-Cable MVPDs 4. Elimination of Network Nonduplication and Syndicated Exclusivity Rules B. Non-FCC Proposals 1. Interim Carriage 2. Mandatory Binding Arbitration 3. Does the FCC Have the Necessary Authority? V. RECOMMENDATIONS AND CONCLUSIONS I. INTRODUCTION

   On October 16, 2010, approximately three million cable TV subscribers across the New York metropolitan area lost access to their local Fox stations and missed the first two games of the World Series. (1) Previously, on March 7, 2010, nearly 3.1 million households lost their local ABC signal and missed the first fourteen minutes of the Academy Awards. (2) In 2008, 1.5 million Time-Warner subscribers lost access to fifteen broadcast stations in fifteen local markets for one month. (3) For nearly one month in 2007, seven hundred thousand Mediacom subscribers in twelve states lost access to twenty-three stations including affiliates of Fox, ABC, NBC, CBS, and the CW. (4) In 2005, seventy-five thousand cable subscribers in Missouri, Louisiana, and Texas lost access to their local Nexstar broadcast affiliates for nearly one year. (5) Examples of these types of signal blackouts date back even further. (6)

   More recently, on February 18, 2011, Univision pulled its broadcast signal from 7,000 Rhode Island households for three months. (7) In March 2011, DISH Network consumers in seventeen markets lost their CBS, FOX, NBC, and CW signals for six days. (8) In September 2011, LIN TV pulled eight broadcast signals from the Mediacom cable systems in Florida, Michigan, and Indiana causing blackouts for nearly 1.2 million subscribers that lasted nearly six weeks. (9) Multiple other blackouts have occurred this year. (10) Each of these blackouts was the result of failed negotiations between the cable or satellite provider and the broadcaster. (11)

   Under the current regulatory scheme, broadcasters and cable providers must enter into negotiations with each other for permission to retransmit a broadcast signal over a cable system. (12) The vast majority of these retransmission consent negotiations are resolved privately, without government intervention and without the loss of broadcast signals to cable subscribers. (13) However, sometimes the negotiations reach an impasse, and the result can be signal blackouts for cable subscribers. When this happens, consumers are inevitably harmed.

   Recently, there has been a growing dispute between cable providers and broadcasters about how to deal with such breakdowns in negotiations. While cable providers call for reform of the retransmission consent regulations, broadcasters resist government intervention. (14) Meanwhile, the FCC has recognized the problem facing consumers and recently initiated proceedings to try to solve it. (15) This Note will examine the contours of the dispute between cable providers and broadcasters and discuss the possible solutions to this growing crisis. In Part II, a brief history of the retransmission consent regulations of the 1992 Cable Act is put forth as necessary background information. (16) Part III of the Note addresses the positions that cable companies and broadcasters have taken in the dispute. Part IV will discuss possible solutions to the dispute. Finally, Part V will offer some recommendations and conclusions as to what the best solution may be.

2. RETRANSMISSION CONSENT

   Originally, cable television existed to serve locations that could not receive broadcast signals. (17) The cable company's job was to take the signal from the airwaves and retransmit it to a subscriber's household. (18) Initially, the FCC maintained it had no authority over cable television because it was not a "broadcaster" covered under the 1934 Communications Act. (19) But as cable systems added "distant" signals, broadcasters began to view cable as a viable alternative; and the FCC, to avoid disturbance of its broadcast regulation, decided to regulate cable as well. (20)

   In the mid-1960s, in order to protect local broadcasting, the FCC required cable companies to carry the local broadcast signal when the cable signal competed for audience with the broadcast signal. (21) Noting the vast growth of the CATV industry (the equivalent of cable) and the value of broadcasting, the Supreme Court in Southwestern Cable upheld these must carry rules as within the FCC's authority. (22) However, the Court restricted the authority to regulate cable to "that reasonably ancillary to the effective performance oft he Commission's various responsibilities for the regulation of television broadcasting." (23)

   In 1984, Congress amended the Communications Act of 1934 to provide a national policy regarding cable television, effectively eliminating the "reasonably ancillary" standard required by Southwestern Cable and allowing for direct regulation. (24) However, in 1985, the D.C. Circuit held that the must-carry rules as implemented "are fundamentally at odds with the First Amendment" and struck them down. (25) The FCC scaled down the rules, but in 1987, the same court struck them down again. (26) This set the stage for the next wave of regulation.

   In 1992, Congress passed the Cable Television Consumer Protection and Competition Act ("1992 Act"). (27) Congress found that broadcast programming was the most popular programming on cable systems and that cable systems obtained great benefits from local broadcast signals, which had historically been obtained without the consent of the broadcaster. (28) The system resulted in an effective subsidy of the development of cable systems by local broadcasters, which in turn resulted in a competitive imbalance between the two industries. (29) To right this imbalance, Congress amended Section 325 of the Communications Act to enable each local commercial broadcast station to elect every three years whether to proceed under the revised must-carry requirements of Section 534 or the new retransmission consent requirements of Section 325. (30)

   The policy of the 1992 Act was to "promote the availability to the public of a diversity of views and information" and "ensure that cable television operators do not have undue market power vis-a-vis video programmers and consumers." (31) The FCC and Congress have consistently maintained that there is an interest in protecting local broadcast stations because of the perceived special role that broadcast television plays in civic life. (32) Together, must-carry and retransmission consent rights provide significant benefits for broadcasters by ensuring they can obtain carriage and continue to provide important local programming to viewers. (33)

   Imposing modified must-carry rules, the 1992 Act requires each cable operator to carry the signals of local commercial broadcast television stations. (34) The must-carry rules were enacted out of the concern that without intervention, cable's dominance in the market could result in local broadcasting being blacked out. (35) The 1992 Act's version of the must-carry rules was upheld as consistent with the First Amendment by the Supreme Court in Turner Broadcasting Systems v. FCC in 1997. (36) In the early years after the adoption of the Act, most broadcasters selected must-carry status, but by 2009, only 37 percent of stations relied on must-carry. (37)

   The second option available for broadcasters under the 1992 Act is retransmission consent. (38) Under Section 325(b), cable operators cannot retransmit a commercial broadcast signal without the station's express consent. (39) Thus, a broadcaster who chooses retransmission consent over must-carry must negotiate with cable companies and other multichannel video programming distributors ("MVPDs") for consent to retransmit its signal. (40) Recognizing the benefits cable providers obtained from carrying broadcast signals, "Congress adopted its retransmission consent provisions to allow broadcasters to negotiate to receive compensation for the value of their signals." (41) Congress intended to establish a marketplace for retransmission rights, but did not intend to "dictate the outcome of the ensuing marketplace negotiations." (42)

   Originally, Congress provided no substantive standards governing retransmission consent negotiations. (43) However, in 1999, Congress adopted new regulations, which required broadcasters engaged in retransmission consent negotiations with MVPDs to negotiate in good faith. (44) The FCC believed that "by imposing the good faith obligation, Congress intended that the Commission develop and enforce a process that ensures that broadcasters and MVPDs meet to negotiate retransmission consent and that such negotiations are conducted in an atmosphere of honesty, purpose and clarity of process." (45) However, this statute was not intended "to subject the retransmission consent negotiations to detailed substantive oversight by the Commission." (46)

   Under Section 325(b)(1)(A), if a broadcaster and an MVPD are unable to reach an agreement, then the MVPD may not retransmit the broadcaster's signal. (47) Because the plain language of the statute says that a broadcaster's signal cannot be retransmitted without consent, when negotiations between broadcasters and MVPDs break down, the lack of consent leads to a possible blackout of the broadcast signal. (48) When retransmission consent is revoked as a result of failed negotiations, "the result is to leave consumers literally in the dark, a result hard to square with the Commission's overall mission to protect the public interest." (49)

3. THE CURRENT DISPUTE: WHAT EACH PARTY WANTS

   Since the 1992 Act, the marketplace has changed considerably. Historically, MVPDs compensated broadcasters for retransmission consent through in-kind compensation, but...