The FCC has upheld an AT&T complaint against a number of TV station groups for failure to negotiate retransmission consent in good faith, a move MVPDs are hoping adds fuel to their argument for renewal of the satellite compulsory license law that includes that good faith mandate.
The FCC didn't fine the stations, but left that big stick in sight, saying it reserved the right to take future enforcement actions, including potential fines or forfeitures (likely levied if the stations did not negotiate in good faith going forward).
The complaints were filed last June against Deerfield Media, GoCom Media, Howard Stirk Holdings, HSH, Mercury Broadcasting, MPS Media, KMTR Television, Second Generation of Iowa and Waitt Broadcasting, all of which the FCC says failed to meet its standard for good faith negotiation. All the groups were represented by Duane Lammers of Max Retrans, a past target of AT&T complaints.
"[W]e find that Defendants’ violated the per se good faith negotiation standards. We therefore grant AT&T’s Complaint, and direct the parties to commence good faith negotiation," the FCC said. ""We find that the Defendants acted in bad faith by refusing to negotiate with AT&T, unreasonably delaying negotiations, and refusing to respond to AT&T’s proposals," the FCC concluded. "Any one of those violations on its own would be sufficient to support our finding. We hold that negotiating jointly does not excuse any member of that joint negotiation from its individual obligation to comply with the good faith obligations of the statute and our rules."
"We find that Defendants’ actions, including a persistent refusal to negotiate, an unreasonable delay of negotiations, and a failure to respond to AT&T’s proposals, violated each of the per se good faith standards raised in AT&T’s Complaint. Because we find three clear violations of the per se negotiating standards, and because of the pending civil proceeding, we need not address, and decline to reach, the separate question of whether Defendants also committed a violation under the totality of the circumstances standard. "
While the stations said that they had essentially delegated to Lammers the negotiations, so that they were in effect in constant negotiations, the FCC did not agree.
The FCC said that joint negotiations were OK, but that there needed to be "separate [and station-specific] negotiation of material issues and separate carriage agreements/amendments," which the FCC said there was not.
"That Defendants may have decided to engage in a joint negotiation with AT&T is not relevant to the question of whether they, on their own or through their common agent, complied with their individual obligations to abide by the per se standards. For the reasons discussed below, we conclude that they did not.
The "refusal to negotiate" is the operative phrase. Broadcasters are under no government obligation to strike deals for their signals and can require they be taken off an MVPD after their existing contract expires if there has been no settlement or agreement on an extension. But they are required by the FCC, and Congress in the STELAR Act, to negotiate in good faith. If they don't, the FCC is empowered to step in.
STELAR, the satellite compulsory license law, is currently being considered for renewal by Congress.
"The record in this case shows that Mr. Lammers made not a single offer or proposal, formal or informal, that could have resulted in the carriage of the Defendant Stations, even if accepted unchanged by AT&T," the FCC said. "Moreover, the record shows that this refusal to negotiate persisted for some time even after AT&T reached an agreement with [[C]] REDACTED [[C]],106 which was the Defendants’ stated condition precedent to engaging in negotiations with AT&T for carriage of Defendant Stations. Defendants’ willful refusal to engage meaningfully with AT&T over a prolonged period, despite AT&T’s repeated requests for them to do so, violated their fundamental obligation to “participate in retransmission consent negotiations with the intent of reaching agreement.”
In fact, the FCC said Lammers' ongoing delay of negotiations while stations, even as stations were blacked out to consumers was "the most egregious example of delay that we have encountered since the good faith rules were adopted," which was almost two decades ago.
The complaint was filed by AT&T (DirecTV and U-Verse) against the nine station owners, which AT&T said had "simply refused to negotiate retransmission consent" for "months on end." That included, said AT&T, ignoring individual proposals, even after the stations went dark on DirecTV and U-Verse. According to AT&T, most of those stations still remain dark to its customers five months later.
“We have reached agreement with three of the nine broadcasters specifically involved in our complaint (Deerfield Media, GoCom Media of Illinois, and Second Generation of Iowa)," said AT&T Thursday (Nov. 7), "and continue to push for progress with the others.”
AT&T pointed out in its complaint that all the stations involved were "managed and controlled by Sinclair Broadcast Group through some type of shared services agreement."
"Typically, broadcast blackouts are rooted in differences over retransmission consent rates and terms," AT&T told the FCC in the complaint, "but this one is the result of an intentional refusal to negotiate. These nine “independent” owners have one common and unlawful goal, which is to drive up the fees AT&T collectively pays, regardless of the popularity of any of the individual stations involved or the size of the marketplace they are each licensed to serve.
AT&T asked the FCC to 1) find that each station had violated the good faith negotiation requirement, 2) compel the stations still not negotiating in good faith to do so, and fine them.
Good faith negotiation complaints are not unusual, but the FCC granting them is. They are generally dismissed for lack of a showing that the negotiations were not in good faith, or dropped after the two sides reach an agreement.
In September, the FCC dismissed a retrans negotiation complaint against filed by cable operator HolstonConnect, saying it was simply a disagreement over price.
“Today's FCC ruling that the broadcast station groups’ behavior was a violation of its rules shows again that the entire retransmission consent process is broken and demands immediate reform," said AT&T, looking to leverage the decision to tighten the FCC's definition of good faith. "This was clearly one of the more egregious examples of how broadcasters routinely hold consumers hostage into paying higher and higher retrans fees, rather than being stewards of the public airwaves.
“The bad faith negotiations that caused these TV blackouts harmed the public and we agree with the FCC's condemnation of these anti-consumer practices. If Congress does not renew STELAR this year, these broadcaster TV blackouts will increase in frequency, as the FCC will no longer be a backstop against such bad faith conduct from broadcasters.
“Pay TV titan AT&T is wrong to try and use today’s ruling in the Deerfield Media proceeding at the FCC as justification for Congress to reauthorize STELAR," said Armstrong Williams, owned or Howard Starks Holdings. "STELAR was passed 30-years ago to temporarily give start-up satellite television companies a significantly discounted copyright license to allow them to better compete against big cable monopolies. But the market and media landscape have fundamentally changed over those 30-years. Those start-up satellite companies have become the AT&T/DIRECTV media behemoth, a $235 billion company, and DISH, a $20 billion company. The stations involved in the Deerfield Media proceeding including my Howard Stirk Holdings Flint WEYI NBC25 /CW21 WWMB Myrtle Beach are so tiny compared to these Pay TV giants, there is no calculation supporting their loud cries for government assistance, and STELAR should be allowed to expire as Congress intended.”
"The size disparity between a behemoth AT&T and a collection of also-ran sidecar TV stations is staggering," said former top FCC official Adonis Hoffman. "For AT&T to cite bad faith in negotiations is like the New England Patriots throwing the red challenge flag against a Pop Warner football team.
"In fairness, this also points out the lingering effects of Sinclair's mis-steps on the Tribune merger, which continues to haunt that company at the FCC."
Hoffman is a former senior legal advisor at the FCC and founder of H-Two Media, which advises media and entertainment companies on M&A and regulatory affairs.