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What to Expect This Retransmission Consent Season

7/31/2017 8:00 AM Eastern

The triennial election cycle for commercial broadcast stations will occur again this fall. And where broadcasters elect retransmission consent, one can expect the negotiations to be even more contentious than the last election cycle (2014).

If recent election cycles are any guide, broadcast stations can look forward to average license fee increases of more than 1,000% over the inflation rate. For some of the smaller cable operators, the current cycle will likely see a $3-per-subscriber rate for the first time for retransmission of the Big Four network stations. Cable systems can expect broadcasters to request license fees not only for the primary broadcast signal, but for each broadcaster’s multicast signal as well. To paraphrase a line in the Mel Brooks film History of the World: Part I, “It’s good to be a broadcaster.”

In addition to license-fee increases on multiple channels, multichannel video programming distributors can expect no relief of any kind from the Federal Communications Commission. While the FCC occasionally rouses itself to the appearance of action, its record of indifference is a matter of record.

In 2000, the FCC promulgated a good faith bargaining standard incumbent on all broadcasters. Seventeen years and thousands of retransmission-consent negotiations later, the FCC has never found a single instance of bad faith dealing on the part of any broadcaster. The FCC’s bias is so well known that MVPDs have given up filing bad-faith dealing complaints. Occasionally, the FCC will add a new category of per se violations to its bad-faith standards, but it has steadfastly refrained from ever finding either a per se violation or a totality of the circumstances violation on the part of any broadcaster. Yes, “It’s good to be a broadcaster.”

MVPDs can expect broadcasters to insist on some very expensive new asks including those with an anti-consumer flavor. Broadcasters will seek to prevent consumers from being able to skip commercials. Although the technology exists for ad skipping and the MVPDs would like to offer this functionality to their subscribers, broadcasters almost always insist on prohibiting MVPDs from offering this feature to consumers. One might be forgiven for thinking that, as consumers will ultimately bear the economic burden of the gargantuan increases in broadcaster license fees, that consumers ought to be able to avail themselves of technologies that MVPDs are willing to provide gratis. That will not be happening anytime soon.

Finally, it is reasonable to assume that broadcasters will demand a commitment from MVPDs to retransmit broadcast signals in the new ATSC 3.0 format. Even though the ATSC 3.0 standards have not yet been adopted by the FCC, the broadcasters will be insisting that MVPDs retransmit the ATSC 3.0 broadcast signal whenever the FCC issues its final regulations. While no one can predict what the standards will be, what we do know is that it will be expensive for MVPDs to retransmit these signals, because the ATSC 3.0 format is not “backward-compatible” with current equipment. To receive and retransmit an ATSC 3.0 signal, MVPDs will need to purchase new receiving and transcoding equipment, switch out set-top boxes for many subscribers and allocate more capacity for retransmission of broadcast signals in the ATSC 3.0 standard. It’s good to be a broadcaster.

Gil Ehrenkranz is counsel at Manatt, Phelps & Phillips in Washington, D.C.

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