News

Can FCC End the Retrans Wars?

10/10/2011 12:01 AM Eastern

It’s retransmission-consent
season again. This time around negotiations
between broadcasters
and multichannel
video-programming distributors
will be even more brutal
than that during the last triennial
cycle. Broadcasters are
again looking forward to extracting
gargantuan per subscriber
fee increases to off set
declining overall revenue. As
they did during the previous
cycle, MVPDs hope to negotiate
what they consider to be a
commercially reasonable per
subscriber rate.

If things work out as they did last
time, the MVPDs will ultimately agree
to increases that far outpace inflation.
This time, MVPDs hope that things
may be different. The Federal Communications
Commission has finally
agreed to wade into the retransmission-
consent process. MVPDs pray for
deliverance from price gouging while
broadcasters count on the continuation
of something close to the status
quo. Both will likely be disappointed.

Dealing with retransmission consent
is about the last thing that the
FCC wanted to do. It is only now taking
up the topic, due to pressure from
Congress. It is the case, however, that
whereas the MVPDs and broadcasters
are almost entirely focused on business
issues, the FCC’s primary goal will
be to reduce the political fallout from
broadcaster-MVPD disputes.

The main cause of broadcastchannel
blackouts is a dispute as to
what constitutes a reasonable price
for MVPD retransmission during contract
renewal negotiations. MVPDs
hope to convince the FCC to declare
huge price increases as a “bad-faith”
negotiating tactic, while broadcasters
will endeavor to convince the FCC that
market rates for their stations warrant
the price increase. However, the FCC
does not care what the price is. It simply
wants to contain any retransmission
consent dispute from spiraling
into a blackout of the broadcast station.
But this will be a difficult goal to
achieve unless the FCC delves into the
issue of retransmissionconsent
fee equity, something
it will seek to avoid
at all costs.

To be fair, the FCC is
in an untenable position.
There really is no
straightforward mechanism
to determine when
a large price increase
is “unfair” or constitutes
“bad faith.” How
would it be possible for
the FCC to calculate the
correct rate increase? Should it permit
broadcasters to charge more for
MVPD subscribers in major television
markets? Should such rates be on
a blended basis to take into account
MVPD subscribers in both larger and
smaller television markets? And just
how would a blended rate be calculated?
An argument can be made that
retransmission-consent fees would
be more equitable if the rate were
lower in major television markets
since broadcaster advertising revenue
is higher in such markets. And
what value should the FCC attach to
the retransmission of broadcast stations
where broadcast station and
cable programming service retransmission
are bundled in a single deal?

Because of the almost impossible
task in resolving the core dispute concerning
pricing, the FCC will likely
focus solely on solutions involving cooling
off periods and any other remedies
that delay the moment when broadcast
stations are blacked out. Neither
MVPDs nor broadcasters will be
pleased, but the truth of the matter is
that until Congress amends the mustcarry/
retransmission-consent statutes,
this is about the best the FCC can do.


Gil Ehrenkranz was VP, legal affairs,
for Discovery Communications and
assistant general counsel to Cablevision
Industries. He is now a solo practitioner
specializing in telecom law in
Washington, D.C.