March 2014

The Federal Communications Commission's unanimous vote to ban coordinated retransmission negotiations among the top four TV stations in a market was treated with cheers by their satellite, cable and telecommunications video competitors who must negotiate those agreements.

The American Cable Association, arguably the point-association on the issue along with the American Television Alliance (ATVA) of which it is a main member, was ecstatic, and said as much. “ACA salutes Federal Communications Commission Chairman Tom Wheeler for leading the effort to put teeth into the regulations that require broadcasters to negotiate retransmission consent with cable and satellite TV providers in good faith. Adoption of the order extracts from a broadcaster’s bite one of several practices that most obviously harm consumers and competition. ACA members are ecstatic that the FCC is finally banning coordinated retransmission consent negotiation between two separately owned, top-rated stations in the same market."

DirecTV, also a member of ATVA, added its two hands clapping. “The FCC’s decision today is a win for consumers," it said. "By restricting broadcasters' ability to collude in retransmission consent negotiations, the FCC took an important first step to protect consumers from local channel blackouts and higher prices. DirecTV appreciates the FCC’s efforts and hopes to work together for additional reform in the near future.” DirecTV and other ATVA members would, among other things, like to see the FCC step in to end blackouts and mandate arbitration in impasses.

Even the Independent Telephone and Telecommunications Alliance (representing mid-sized telecom carriers) felt compelled to weigh in to celebrate the move. “ITTA applauds the FCC’s efforts to reform the outdated retransmission consent rules," said ITTA president Genny Morelli. "We have long argued that the FCC has the legal authority to adopt reforms that would restore balance to the retransmission consent marketplace and we are pleased to see the Commission move forward on these important issues."

[Commentary] Watch what the Federal Communications Commission does. For the first time in years, the panel should move to slow down media consolidation by closing a loophole that has allowed a handful of the nation’s largest broadcasters to skirt laws limiting station ownership.

No surprise, the broadcast industry is vehemently opposed to ending the practice of Joint Sales Agreements, but this sort of business tactic (covered in-depth by The Wall Street Journal) has diminished local ownership and allowed a small number of big players to control the flow of information over huge swaths of the country.

Local television news is at risk of becoming more about profits for out-of-town corporate bosses than about informing communities with quality news. Why should viewers care about any of this? The fewer owners there are in broadcast news, the fewer perspectives will be featured on the public airwaves. Some argue it makes business sense for the industry to combine operations to be more efficient. But at what cost? With consolidation, women and minority ownership has dropped.

On the issue of curbing JSAs, FCC Chairman Tom Wheeler is right. The FCC should close the loophole. That might lead to more truly diverse ownership and programming.

The Federal Communications Commission took steps to close a loophole in its TV ownership rules, making sure that a party’s interests in a market are properly counted.

Removal of the loophole helps ensure competition, localism, and diversity in local broadcast markets by preventing a practice that previously resulted in consolidation in excess of what is permitted under the Commission’s rules. A JSA, or joint sales agreement, is between two stations in the same market in which one station is authorized to sell advertising time on the other station. The Commission’s radio rules have long recognized that these agreements create an ownership interest when the JSA allows for the sale of 15% or more of the advertising time on a competing local station.

The Report and Order applies this same standard to broadcast television. Parties to existing TV JSAs will have two years to come into compliance with the applicable local ownership limits. Waiver requests, considered on a case-by-case basis, must show that strict compliance with the rule is inconsistent with the public interest.

Also adopted was a Further Notice of Proposed Rulemaking that initiates the Commission’s 2014 Media Ownership Quadrennial Review and incorporates the ongoing 2010 Quadrennial Review record. The FNPRM asks for new and additional information on current market conditions to ensure a comprehensive and refreshed record. The current ownership rules remain in place while the review is pending.

The FNPRM additionally asks for comment on whether commercial television stations should be required to disclose shared service agreements and how best to achieve disclosure. An SSA allows same market stations to share resources, such as employees, administrative services, or hard assets, such as a news helicopter. The Further Notice of Proposed Rulemaking also recommends reinstatement of the Commission’s revenue-based “eligible entity” standard, finding that the program would support new entry into the broadcast industry by small businesses.

The Federal Communications Commission adopted a Report and Order that strengthens its rules governing retransmission consent negotiations. This Order will help curtail a practice that has put upward pressure on cable and Direct Broadcast Satellite programming costs as well as prices to consumers.

The Communications Act requires cable systems and other pay television services to obtain a broadcast television station’s retransmission consent before carrying the station’s signal. The Act also requires broadcasters and pay television service providers to negotiate retransmission consent agreements in good faith.

The Order prohibits a television broadcast station ranked among the top four stations (as measured by audience share) from negotiating retransmission consent jointly with another top four station if the stations are not commonly owned and serve the same geographic market. Joint negotiation by these stations leads to higher retransmission consent fees because the practice reduces competition between the stations. Additionally, the threat of losing the programming of two or more top four stations at the same time gives the stations undue bargaining leverage in negotiations with Multichannel Video Program Distributors. To target collusive behavior effectively, the Order also defines joint negotiations.

Chairman Wheeler, Commissioners Clyburn, Rosenworcel, Pai and O’Rielly with Chairman Wheeler, Commissioners Clyburn, Rosenworcel, Pai and O’Rielly issued statements.