Retrans Reform Unlikely Despite Urgent Pleas

Verbal Aid from D.C. Is Industry's Best Hope
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WASHINGTON — The CBS-Time Warner Cable dispute has put a spotlight on the issue of retransmission consent in the nation’s capital.

But if past is prologue, the Federal Communications Commission in the short term will confine itself to the role of chief urger and prodder to resolve contractual spats. And Congress will use its bully pulpit to pressure parties to reach agreements until the issue gets addressed through legislation, which probably won’t happen until 2015.

If the CBS-TWC matter is not resolved before too much longer, FCC acting chairwoman Mignon Clyburn could take the next step — after her current calls for both sides to end the impasse — and ask each party to directly make a case to the agency as to why it is negotiating in good faith and the other side isn’t. TWC ejected 13 CBSowned stations, as well as Showtime, Flix and Smithsonian Channel, from its cable lineups in eight markets, including New York and Los Angeles, on Aug. 2. As of press time last week, they were still off .

DEFINE ‘ACTION’

The chairwoman’s office declined comment last week on what she meant when she threatened to take “appropriate action.” Commissioner Jessica Rosenworcel has signaled she would like the FCC to use its authority to get such impasses resolved, according to an aide.

The FCC is empowered to ensure negotiations are conducted in good faith and do not result in unreasonable cable rates, which cable operators argue give it plenty of room to rein in retransmission payments by mandating outside arbitration or ending blackouts. But agency lawyers have continued to maintain that its powers are limited and Congress needs to give it more direction.

In the past, the FCC has gone as far as getting both sides into a room in Washington to do their talking.

Longer term, the FCC has an open docket on proposed retransmission reforms, which could include pre-empting syndicated exclusivity and non-network duplication rules to allow cable operators to negotiate for carriage with out-of- market affiliates of the same network. But that would take an agency chair willing to tackle that “nuclear option” for broadcasters.

On Capitol Hill, there have been the usual calls for a CBS-TWC deal from legislators in affected areas and those historically vocal in their dislike of blackouts. Congressional action is unlikely over the short or medium term, but retrans watchers around Washington suggest reauthorization of the Satellite Television Extension and Localism Act (STELA) could be a vehicle for change.

There could be increasing pressure from Washington to make that change if retrans battles proliferate with the creation of broadcast “super groups” and the need to accommodate online rights in new deals.

Already, CBS’s decision to block Time Warner Cable broadband subscribers from access to CBS content has drawn some fire from Washington.

Sen. Ed Markey (D-Mass.), a veteran retransmission-enforcement critic while in the House, asked the FCC to investigate the online aspect. “A consumer’s choice of cable television provider should not be tied to her ability to access Internet content that is freely available to other consumers,” he said.

Echoing language in the FCC’s Open Internet order, which Markey strongly backed, the senator said that in the case of CBS’s action, “consumers lose their freedom to access the Internet content of their choice. “

Rep. Jim McDermott (D-Wash.) went further, arguing that CBS had violated the FCC’s 2005 policy statement that “consumers are entitled to access the lawful Internet content of their choice.” That is a hard case to make as the FCC since then has enshrined the statement in an Open Internet order that makes clear it is applying that prohibition on blocking to Internet providers, not online content providers.

Using the TWC-CBS dispute as a flashpoint, cable operators have called on both the FCC and Congress to revamp retransmission-consent regulations to prevent blackouts or take a number of others steps that have been on their to-do lists: mandated arbitration, getting rid of must-buy provisions and exclusivity protections and joint negotiations they say all contribute to an un-level playing field.

‘HE’S A CABLE GUY’

Clyburn is unlikely to do anything in her short term beyond a repeat of the “good faith” defense data drop, which the FCC employed to resolve the 2010 retrans dispute between Fox and Cablevision Systems, if the standoff continues beyond next week. But Tom Wheeler, who’s next in line to chair the regulator, could be a different story.

“He’s a cable guy and might take some aggressive action,” a veteran cable attorney said, alluding to Wheeler’s past role as head of the National Cable & Telecommunications Association.

The STELA path to longer-term reform is more promising. That law, which provides for distant network signal licenses, must be renewed by the end of next year. Its expiration could be a step toward phasing out must-carry and retransmission rules for a pure-play negotiation. More likely, STELA could be renewed but with specific language about cable’s rights to import out-of-market signals if it can’t strike in-market deals with broadcasters.

TAKEAWAY

The TWC-CBS dispute has put retransmission consent in the Washington spotlight, but don’t expect a short- or medium-term legislative remedy.

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