As we reported here, the FCC released its proposals regarding 2015 regulatory fees last May. As August turned into September, licensees were getting anxious as to when the FCC would get around to issuing an order setting the fees and opening the “Fee Filer” online payment system. That happened today with the release of this Public Notice and this Report and Order and Further Notice of Proposed Rulemaking (note that for the reasons discussed below, these FCC website links will not function correctly until the FCC’s website resumes normal operation on September 8th).
FCC Chairman Wheeler released a blog post today discussing a number of changes and proposed changes to rules impacting TV and radio broadcasters. While his blog contained good news for the radio industry, TV broadcasters are likely to be less pleased.
On the TV side there are two major initiatives. First, the Chairman is proposing to his fellow Commissioners that the FCC adopt an order eliminating what he termed “outdated exclusivity rules”–the FCC’s network non-duplication and syndicated exclusivity rules. These “non-dup” and “syndex” rules, as they are more commonly known, essentially provide a process by which TV broadcasters can efficiently implement the geographic exclusivity they negotiated in their programming agreements without the need for expensive court actions. The purpose of these rules is to prevent multi-channel video program distributors (MVPDs) from violating that exclusivity by importing the exclusive programming from out-of-market TV stations.
These rules are of particular importance during retransmission negotiations, since without such rules, MVPDs could import, for example, a distant affiliate of the same network (one which obviously did a poor job of negotiating its own retransmission agreement) to violate the local station’s exclusivity. With the rule change proposed by the Chairman, the local station could no longer quickly and efficiently resolve the problem by filing a complaint at the FCC. Instead, it would need to initiate a long and costly court battle that would inevitably pull in (1) the distant affiliate, and (2) the network whose contract the distant affiliate breached by entering into a retransmission agreement exceeding that affiliate’s geographic right to the network’s programming.
It’s not hard to understand why an MVPD would like blocking the importation of exclusive programming to be a complex, time-consuming, and expensive proposition for a local TV station, but it’s less clear why the federal government would want to create a less efficient process that further clogs up the courts with multi-party litigation. The obvious answer is that it is not merely a procedural change, but one meant to alter the balance of substantive rights that existed when Congress created the retransmission consent process.
The second major TV-related item is the Chairman’s circulation among his colleagues of a Notice of Proposed Rulemaking (NPRM) to review the process used to determine whether broadcasters and MVPDs are negotiating retransmission consent rights in “good faith”. The purpose of the good faith regulations is to determine whether a party is negotiating with an intent other than that of reaching a deal (e.g., stalling for time). To implement this requirement, the FCC created a list of bad faith tactics that are prohibited (for example, refusing to show up for negotiations), as well as a “totality of the circumstances” test which seeks to determine whether a party’s conduct as a whole indicates that the party has not made “good faith” efforts to reach a deal.
While only cable systems have been found to have engaged in bad faith negotiations by the FCC, the MVPD industry has long sought to alter the traditional meaning of “good faith” in an effort to limit certain negotiating tactics that have nothing to do with whether a party is intent upon reaching a deal. Indeed, the focus has been on limiting the negotiation options available to broadcasters, even where, perversely, the result would be longer MVPD program blackouts.
The NPRM proposed by Chairman Wheeler, responding to a congressional directive to examine the matter, will apparently seek to alter the FCC’s approach to determining whether parties are engaging in good faith retransmission consent negotiations. Networks, local TV stations, and MVPDs all will no doubt eagerly await release of this NPRM to determine how the FCC’s proposals are likely to affect negotiating leverage and fees in the retransmission consent world–an odd result given that Chairman Wheeler’s blog post said the reason for eliminating the network non-dup and syndex rules is to “take [the FCC’s] thumb off the scales” in retransmission negotiations.
Call us cynics, but we’ll be surprised if “importing a station into a market where that station has no program rights” joins the list of bad faith negotiating tactics, even though it is the epitome of seeking a way around entering into an agreement with the local broadcaster.
From the broadcast industry’s “glass is half full” perspective, the Chairman’s blog post also indicated that the FCC will soon conclude a nearly four-year effort to update the FCC’s station contest rule. That rule requires broadcasters to regularly describe the material terms of station contests on-air. After long consideration, it appears the FCC will allow contest rules to be posted online as an alternative to speed-reading contest rules on-air. We earlier wrote about this proceeding at various stages in FCC Proposes to Clear Airwaves of Boring Contest Rules, But State Law Issues Remain and Bringing the FCC’s Contest Rule Up to Date. This rule change has had broad support, and while applicable to both TV and radio, is of greater practical importance to the radio industry, which tends to run more station contests and doesn’t have the option of airing written rules onscreen.
Finally, following up on his promise before the NAB Show in April, Chairman Wheeler indicated that he will also recommend to his colleagues that the FCC move forward with adopting several proposals in the 2013 AM Revitalization NPRM. This was a hot topic at the NAB Show in Las Vegas earlier this year when the Chairman signaled that the establishment of a window specifically for AM stations to apply for FM translators was essentially off the table, as Scott Flick wrote last April. Most considered an AM-only filing window to be the most practical and effective path to AM revitalization, particularly for AM daytime-only stations. In fact, the outcry in response to the Chairman’s dismissal of that option appeared to have stalled the AM Revitalization proceeding. While it looks like AM radio broadcasters can expect some relief from the FCC soon, most will be watching to see if an FM translator window for AM stations is part of that relief. Regardless, today is one of those days where you’d rather be a radio station than a TV station.
The FCC has released a Notice of Proposed Rulemaking, Report and Order, and Order (really, that’s the title of it) (“NPRM/R&O”) proposing regulatory fees for Fiscal Year 2015 and making other changes to its regulatory fee structure. Comments on the FCC’s proposals are due June 22, 2015, with reply comments due July 6, 2015.
For the fourth consecutive year, the FCC proposed $339,844,000 in regulatory fee payments. The proposed fee tables are attached to the NPRM/R&O as Appendix C and can be used to estimate your likely 2015 regulatory fee burden. Note that effective this year, regulatory fees on Broadcast Auxiliary licenses and Satellite TV construction permits have been eliminated from the fee schedule.
In the NPRM, the FCC requested comment on whether the apportionment of regulatory fees between TV and radio broadcasters should be changed, noting that it expects to collect approximately $28.4 million from radio broadcasters and $23.6 million from TV broadcasters, but that commercial radio stations outnumber commercial TV stations by 10,226 to 4,754. Because the FCC generally allocates regulatory fees based upon the number of FCC employees employed in regulating a particular service, the FCC appears to be suggesting that radio broadcasters may have to shoulder a larger share of the broadcast regulatory fee burden
The FCC also noted that while TV regulatory fees are based upon the size of the DMA in which the TV station is located, radio fees are based upon the population actually served and the class of the station. The NPRM seeks comment on whether changes should be made to this structure, but indicated that any changes made would be unlikely to impact fees this year.
In addition, the FCC requested comment on a petition filed by the Puerto Rico Broadcasters Association requesting regulatory fee relief for broadcasters in Puerto Rico due to economic hardships and population declines specific to Puerto Rico.
Finally, the FCC adopted some changes to its regulatory fee structure. The most significant of these is a new regulatory fee, proposed to be set at $0.12 per subscriber annually, imposed upon direct broadcast satellite (“DBS”) providers (i.e., DISH and DIRECTV). The FCC pointed out that while DBS providers historically have paid regulatory fees with respect to regulation by the International Bureau, they have not paid fees with respect to the Media Bureau which also regulates the service. The payment of fees by DBS providers to recover costs associated with Media Bureau regulation of DBS was teed up in a notice of proposed rulemaking last year and was adopted in the NPRM/R&O.
After comments and reply comments are received, the FCC will release an order setting forth the final 2015 regulatory fee amounts. This order is usually released in August but sometimes isn’t available until September. The order will also establish the precise filing window for submitting regulatory fees, which is typically in the latter part of September.
Those wishing to oppose the proposed regulatory fee changes will need to file their comments and reply comments with the FCC by the respective June 22, 2015 and July 6, 2015 deadlines.
At its Open Meeting scheduled for next Thursday, May 21, 2015, the FCC will consider extending emergency information accessibility rules to “second screen” devices such as computers, tablets, and smartphones. The contemplated Second Report and Order and Second Further Notice of Proposed Rulemaking would expand the class of entities subject to the FCC’s accessibility rules (adopted in April 2013) to include multi-channel video programming distributors (“MVPDs”) providing linear video programming on second screen devices. Such a change could have far-reaching implications for both MVPDs and device manufacturers.
By way of background, the FCC released a Report and Order (“Order”) and Further Notice of Proposed Rulemaking (“FNPRM”) on April 9, 2013, adopting some, and proposing other, emergency information and video description rules to implement Sections 202 and 203 of the Twenty-First Century Communications and Video Accessibility Act of 2010. Among other requirements, the Order adopted new rules mandating that video programming distributors (“VPDs”) present aurally on a secondary audio stream (“SAS”) any non-newscast emergency information that it presents visually. The emergency information provided on the SAS must be read at least twice in full and preceded by an aural tone to alert blind and visually impaired audience members that emergency information is available and to differentiate audio accompanying the underlying programming from emergency information audio.
In the FNPRM, the Commission sought comment on whether an MVPD that permits its subscribers to access linear video programming via second screen devices qualifies as a VPD that is providing “video programming”, as defined in Sections 79.1(a)(1) and (2) of the FCC’s Rules, and is therefore covered by the emergency information requirements adopted in the Order. Issues left open in the FNPRM that the FCC will likely have to address in drafting the Second Report and Order include:
- Who bears the burden of making emergency information available on these devices: the MVPD, the device manufacturer, or both?
- Should the rules apply regardless of where the subscriber is located when accessing the programming (i.e., inside or outside the home)?
- Does it matter whether the emergency content is being delivered over the MVPD’s IP network or over the Internet?
Although the FCC’s announcement in the tentative agenda for the meeting mentions only proposed rules related to accessibility of emergency alerts, the FNPRM also opened the door to extending video description rules to second screen devices. Notably, the FCC has remarked that, “as a technical matter, once the [SAS] is received by a device, that stream can be made available regardless of whether it is used for emergency information or video description.” Next week, we’ll hopefully learn how far the FCC intends to go on both of these requirements.
As we posted earlier, the FCC voted at its February meeting to preempt state laws in Tennessee and North Carolina restricting municipalities from providing broadband service. The FCC has now released the text of its Order, and it reveals the expanse of the FCC’s concerns, filling in the details as to the types of state law provisions the FCC considers to be barriers to broadband competition and therefore subject to preemption. The Order furnishes critical guidance to other municipalities considering a challenge of laws in their own states. It also informs state legislators as to how they can modify existing state laws to avoid a future confrontation with the FCC.
In the Order, the FCC preempted a Tennessee law prohibiting municipal electric utilities from providing broadband service outside their service areas, and certain restrictions and requirements of a North Carolina law. The FCC did so under its asserted authority pursuant to Section 706 of the Telecommunications Act of 1996 to remove barriers to broadband investment and promote broadband competition. The specific restrictions the FCC found to constitute or contribute to such barriers are summarized below, and the breadth of the FCC’s preemption of these restrictions is substantial. As a result, no one should be surprised to see more preemption requests arriving at the FCC.
The Tennessee law was fairly straightforward. It prohibited a municipally-owned electric power system from offering internet or video services anywhere outside the geographic footprint in which it provides electric service. The FCC found that this territorial restriction was an explicit barrier to broadband investment and competition, and used its authority under Section 706 to preempt the restriction. This portion of the FCC’s decision offers no real surprises, and relies on a fairly basic view of what constitutes a barrier to growth in municipal broadband.
North Carolina Law
Far more interesting is the portion of the Order relating to North Carolina. The North Carolina law was more complex, containing a variety of restrictions and requirements for municipalities wishing to deploy broadband service. The FCC found that, taken in the aggregate, these portions of the law created a barrier to broadband investment and competition, leading the FCC to preempt them. While acknowledging that some of the preempted provisions in the North Carolina law might have been allowed to stand individually, the FCC concluded that the aggregate effect required their preemption. In taking this approach, the FCC left some uncertainly as to which provisions it would have preempted on even a stand-alone basis, but provided very helpful guidance as to both the nature and scope of the FCC’s concerns. As the list of provisions preempted by the FCC set forth below indicates, the FCC’s view of barriers to municipal broadband growth is quite expansive.
Continue reading →
For a company that could always punch well above its weight in drawing press coverage, Aereo’s sale of its assets in bankruptcy last week drew surprisingly little coverage.
Less than a month before last year’s Supreme Court decision finding that Aereo’s retransmission of broadcast TV signals over the Internet constituted copyright infringement, a Forbes article discussing Aereo’s prospects in court noted the company had “a putative valuation of $800 million or so (that could vault up if Aereo wins).” The article went on to note that “It’s a tidy business, too, bringing in an estimated $40 million while reaping 77% gross margins ….”
Aereo made its case before a variety of judges and in the court of public opinion that it was an innovative tech company, with a growing patent portfolio and cutting edge technology. When broadcasters argued that Aereo was merely retransmitting broadcast programming to subscribers for a fee without paying copyright holders, Aereo doubled down, arguing before the Supreme Court that it was at the vanguard of cloud computing, and that a decision adverse to Aereo would devastate the world of cloud computing. In a blog post published the day Aereo filed its response brief at the Court, Aereo CEO Chet Kanojia wrote:
If the broadcasters succeed, the consequences to American consumers and the cloud industry are chilling.
The long-standing landmark Second Circuit decision in Cablevision has served as a crucial underpinning to the cloud computing and cloud storage industry. The broadcasters have made clear they are using Aereo as a proxy to attack Cablevision itself. A decision against Aereo would upend and cripple the entire cloud industry.
So Aereo’s narrative heading into the Supreme Court was clear: Aereo is a cutting edge technology company that is not in the content business, and a prototypical representative of the cloud computing industry in that industry’s first encounter with the Supreme Court.
As CommLawCenter readers know, the Supreme Court rejected that narrative, finding that a principal feature of Aereo’s business model was copyright infringement, and the Court saw little difficultly in separating Aereo’s activities from that of members of the public storing their own content in the cloud.
The results of Aereo’s asset sale reveal much about the accuracy of the Supreme Court’s conclusions, and about the true nature of Aereo itself. The value of Aereo’s cutting edge technology, patent portfolio, trademark rights, and equipment when sold at auction fell a bit short of last year’s $800 million valuation. How much was Aereo worth without broadcast content? As it turns out, a little over $1.5 million. But even that number apparently overstates the value of Aereo’s technology as represented by its patent portfolio.
Tivo bought the Aereo trademark, domain names, and customer lists for $1 million, apparently as part of its return to selling broadcast DVRs. Another buyer paid approximately $300,000 for 8,200 slightly-used hard drives.
And the value of the Aereo patent portfolio? $225,000.
To add insult to injury, the patent portfolio was not purchased by a technology company looking to utilize the patents for any Internet video venture. The buyer was RPX, a “patent risk solutions” company. The World Intellectual Property Review quoted an RPX spokesman regarding the purchase, who stated that “RPX is constantly evaluating ways to clear risk on behalf of its more than 200 members. The Aereo bankruptcy afforded RPX a unique opportunity to quickly and decisively remove risk in the media and technology sectors, thus providing another example of the clearinghouse approach at work.”
In other words, the Aereo patent portfolio was purchased for its nuisance value, which, having lost the ability to resell broadcast programming, turned out to be all the value Aereo had.
I wrote in March of last year that the FCC had proposed fines of $1,120,000 against Viacom, $530,000 against NBCUniversal, and $280,000 against ESPN for airing ads for the movie Olympus Has Fallen that promoted the movie with an EAS alert tone. Seven Viacom cable networks aired the spot a total of 108 times, seven NBCUniversal cable networks aired it a total of 38 times, and ESPN aired it a total of 13 times on three cable networks.
According to the FCC, NBC elected to pay its $530,000 fine shortly thereafter and call it a day, but Viacom and ESPN challenged their respective fines, arguing that the fines should be rescinded or reduced because:
- as programmers, Viacom and ESPN lacked adequate notice that Section 11.45 of the FCC’s Rules (the prohibition on false EAS tones) and Section 325 of the Communications Act (the prohibition on false distress signals) applied to them;
- the prohibition on false EAS tones does not apply to intermediary program distributors, as opposed to broadcast stations and cable systems that transmit directly to the public;
- the use of the EAS tone in the ad was not deceptive as it was clear from the context that it was not an actual EAS alert; and
- Viacom and ESPN did not knowingly violate the prohibition on transmitting false EAS tones.
In an Order released earlier today, the FCC rejected these arguments, noting that Section 325 of the Communications Act and Section 11.45 of the FCC’s Rules are not new, and that they apply to all “persons” who transmit false EAS tones, not just to broadcasters and cable/satellite system operators. The FCC found that transmission of the network content to cable and satellite systems for distribution to subscribers constituted “transmission” of false EAS tones sufficient to trigger a violation of the rule. In reaching this conclusion, the FCC noted that both Viacom and ESPN had reviewed the ad before it was aired and had the contractual right to reject an ad that didn’t comply with law, but had failed to do so. The FCC also concluded that it was irrelevant whether the use of the EAS tone was deceptive, as the law prohibits any use of the tone except in an actual emergency or test of the system.
In line with many prior FCC enforcement decisions, the FCC found the violations to be “willful” on the grounds that it did not matter whether the parties transmitting the ads knew they were violating a law, only that they intended to air the ads, which neither party disputed. The FCC summed up its position by noting that it “has consistently held that ignorance or mistake of law are not exculpating or mitigating factors when assessing a forfeiture.”
While Viacom and ESPN also challenged the sheer size of the fines, the FCC noted that the base fine for false EAS tone violations is $8,000, and that in assessing the appropriate fines here, it took into account “(1) the number of networks over which the transmissions occurred; (2) the number of repetitions (i.e., the number of individual transmissions); (3) the duration of the violation (i.e., the number of days over which the violation occurred); (4) the audience reach of the transmissions (e.g., nationwide, regional, or local); and (5) the extent of the public safety impact (e.g., whether an EAS activation was triggered).” Because there were “multiple violations over multiple days on multiple networks, with the number of transmissions doubled on some networks due to the separate East Coast and West Coast programming feeds,” the FCC concluded the size of the fines was appropriate.
In describing more precisely its reasoning for the outsize fines, the FCC’s Order stated:
As the rule clearly applies to each transmission, each separate transmission represents a separate violation and Viacom cites no authority to the contrary. Moreover, the vast audience reach of each Company’s programming greatly increased the extent and gravity of the violations. Given the public safety implications raised by the transmissions, and for the reasons set forth in the [Notice of Apparent Liability], we find that the instant violations, due to their egregiousness, warrant the upwardly adjusted forfeiture amounts detailed by the Commission.
Finally, to buttress its argument for such large fines, the FCC pulled out its “ability to pay” card, noting the multi-billion dollar revenues of the companies involved and stating that “entities with substantial revenues, such as the Companies, may expect the imposition of forfeitures well above the base amounts in order to deter improper behavior.”
While today’s Order is not surprising in light of the FCC’s increasingly tough treatment of false EAS tone violations since 2010, it is not all bad news for the media community. To the extent that one of more of the Viacom, ESPN or NBCUniversal networks that transmitted the ads is likely carried by nearly every cable system in the U.S., the FCC could have elected to commence enforcement actions and issue fines against each and every system that failed to delete the offending content before transmitting the network programming to subscribers. Pursuing such fines would be expensive for all affected cable and satellite systems, but particularly devastating for smaller cable systems.
While it is always possible that the FCC could still commence such proceedings, it is notable that the FCC specifically rejected Viacom’s argument that it was unfair for the FCC to fine the networks while not fining the ad agency that created the ad or the cable and satellite systems that actually delivered the ad to subscribers. It therefore appears that, at least for now, the FCC is content to apply pressure where it thinks it will do the most good in terms of avoiding future violations. Should the FCC decide to broaden its enforcement efforts in the future however, we’ll be hearing a lot more about my last post on this subject–ensuring you are contractually indemnified by advertisers for any illegal content in the ads they send you to air.
The press has been abuzz in recent months regarding the launch of various Internet-based video services and the FCC’s decision to revisit its current definition of Multichannel Video Programming Distributors (MVPDs). In December, the FCC released a Notice of Proposed Rulemaking (NPRM), seeking to “modernize” its rules to redefine what constitutes an MVPD. The FCC’s proposals would significantly expand the universe of what is considered an “MVPD” to include a wide-variety of Internet-based offerings. Today, the FCC released a Public Notice providing the dates by which parties can provide their own suggestions regarding how to modify the definition of “MVPD”. Comments are now due February 17, 2015, with reply comments due March 2, 2015.
The Communications Act currently defines an “MVPD” as an entity who “makes available for purchase, by subscribers or customers, multiple channels of video programming.” Specific examples given of current MVPDs under the Act are “a cable operator, a multichannel multipoint distribution service, a direct broadcast satellite service, or a television receive-only satellite program distributor who makes available for purchase, by subscribers or customers, multiple channels of video programming.” The Act states, however, that the definition of MVPD is “not limited” to these examples.
Historically, MVPDs have generally been defined as entities that own the distribution system, such as cable and DBS satellite operators, but now the FCC is asking for comments on two new possible interpretations of the term “MVPD.” The first would “includ[e] within its scope services that make available for purchase, by subscribers or customers, multiple linear streams of video programming, regardless of the technology used to distribute the programming.” The second would hew closer to the traditional definition, and would “require an entity to control a transmission path to qualify as an MVPD”. The FCC’s is looking for input regarding the impact of adopting either of these proposed definitions.
What all this means is that the FCC is interested in making the definition of “MVPD” more flexible, potentially expanding it to include not just what we think of as traditional cable and satellite services, but also newer distribution technologies, including some types of Internet delivery.
Underscoring its interest in this subject, the FCC asks a wide array of questions in its NPRM regarding the impact of revising the MVPD definition. The result of this proceeding will have far-reaching impact on the video distribution ecosystem, and on almost every party involved in the delivery of at least linear video programming. Consequently, this is an NPRM that will continue to draw much attention and merits special consideration by those wondering where the world of video distribution is headed next.
Yesterday, the FCC released a Notice of Proposed Rulemaking proposing that broadcast radio licensees, satellite TV/radio licensees, and cable system operators move the bulk of their public inspection files online. The FCC previously adopted an online public file requirement for broadcast TV, and sees this as the logical next step.
The FCC noted that adoption of the online broadcast TV public file “represent[ed] a significant achievement in the Commission’s ongoing effort to modernize disclosure procedures to improve access to public file material.” As such, the FCC is proposing the same general approach for transitioning broadcast radio, satellite TV/radio, and cable system operators to an online public file.
Specifically, the FCC proposes to:
- require entities to upload only documents that are not already on file with the FCC or for which the FCC does not maintain its own database; and
- exempt existing political file material from the online file requirement and instead require that political file documents be uploaded only on a going-forward basis.
While the FCC indicates it is not generally interested in modifying the content of public inspection files in this proceeding, it does propose some new or modified public inspection file requirements, including:
- requiring broadcast radio, satellite TV/radio, and cable system operators to post online the location and contact information for their local public file;
- requiring cable system operators to provide information about the geographic areas they serve; and
- clarifying the documents required to be kept in the cable public file.
To address online file capacity and technical concerns related to the significant increase in the number of online file users that the proposed expansion will bring, the FCC seeks comment on:
- whether it should require that only certain components of the public file be moved online;
- any steps the FCC might take to improve the organization of the online file and facilitate the uploading and downloading of material;
- the amount of time the FCC should provide entities to upload documents to the online file;
- whether the FCC should adopt staggered filing dates by service (broadcast radio, satellite radio, satellite TV, and cable);
- whether to otherwise stagger or alter existing filing deadlines; and
- any other ways the FCC can improve performance of the online public file database.
With respect to broadcast radio, the proposed online public file rule would require stations to upload all documents required to be in the public file that are not also filed in CDBS (or LMS) or otherwise available at the FCC’s website. Just as with the online broadcast TV file, the FCC proposes to exempt letters and emails from the public from being uploaded due to privacy concerns, instead requiring that those documents continue to be maintained in the “paper” local public file.
The FCC “recognize[s] that some radio stations may face financial or other obstacles that could make the transition to an online public file more difficult.” In response, the FCC proposes to:
- begin the transition to an online public file with commercial stations in the top 50 markets that have five or more full-time employees;
- initially exempt, for two years, non-commercial educational (NCE) radio stations, as well as stations with fewer than five full-time employees from all online public file requirements; and
- permit exempted stations to voluntarily transition to an online public file early.
The Commission also is seeking comment on:
- whether it is appropriate to temporarily exempt other categories of radio stations from all online public file requirements, or at least from an online political file requirement;
- how the FCC should define the category of stations eligible for a temporary exemption;
- whether the FCC should permanently exempt certain radio stations, such as NCEs and stations with fewer than five full-time employees, from all online public file requirements; and
- whether the FCC should exclude NCE radio station donor lists from the online public file, thereby treating them differently than NCE TV station donor lists, which must currently be uploaded to the TV online file.
The FCC proposes to treat satellite TV/radio licensees and cable system operators in essentially the same manner as broadcast radio by requiring them to upload only material that is not already on file with the Commission. Because the only document these entities file with the FCC that must be retained in the public inspection file is the EEO program annual report (which the FCC will upload to the file), almost all material required to be kept by these entities in the online file will need to be uploaded.
Comments will be due 30 days after publication of the NPRM in the Federal Register and reply comments will be due 30 days thereafter.
Few dates on the broadcasters’ calendar are easier to miss than the deadline for TV stations (and a few fortunate LPTV stations) to send their must-carry/retransmission election letters to cable and satellite providers in their markets. Because it doesn’t occur every year, or even every other year, but every third year, the triennial deadline can slip up on you if you don’t closely monitor our Broadcast Calendar. For those that haven’t been paying attention, October 1, 2014 is the deadline for TV stations to send their carriage election letters to MVPDs. The elections made by this October 1st will govern a station’s carriage rights for the three-year period from January 1, 2015 to December 31, 2017, and this will be the first set of election letters that stations must immediately upload to their online public inspection file at the FCC.
I noted in a post here three years ago that the impact of these elections is becoming more significant with each three-year cycle. In particular, that post focused on the fact that network-affiliated stations can no longer consider retrans revenue to be “found” money, but instead as revenue essential to both short-term and long-term survival. Short-term, in that stations must compete for programming and advertising against cable and satellite programmers that have long had two revenue streams–advertising and subscriber fees. Long-term, in that there was little doubt that networks were looking to charge affiliates more for network programming by taking an ever larger share of retrans revenue, and that it was only a matter of time before networks began selecting their affiliates based not upon past performance, but upon which station could bring the best financial package to the network going forward.
As we’ve learned over the past year in particular, that means not just negotiating the best retransmission deals possible, but sending an increasing portion of those revenues to the network. Wells Fargo analyst Marci Ryvicker, who will be one of our speakers at the 2014 Pillsbury Trends in Communications Finance event in New York next month, noted that pattern just a few weeks ago. Using CBS’s recent projections on the overall revenue it expects to receive from affiliates, she was able to calculate the monthly affiliate cost for CBS programming at $1.30 per subscriber by 2020. Add to that the station’s costs for negotiating retrans deals, as well as the increasing cost of producing local programming and securing attractive syndicated content, and it is clear that no network affiliate can afford to be cutting substandard retrans deals and hope to survive in the long term. MVPDs may grumble about those “greedy stations” during retrans negotiations, but generating the revenue necessary to retain the programming that attracts cable, satellite, and over-the-air viewers (not to mention advertisers) is not an optional activity for local TV stations.
The impact of this is not, however, limited to purely matters of retransmission. Yes, broadcasters can no longer afford to enter into amateur retrans deals that threaten to alienate their networks by providing below-market rates, or which sloppily authorize retransmission or streaming rights far outside the local broadcaster’s market (this mistake becoming even more consequential if the FCC moves forward in eliminating the network non-duplication rule). The bigger trend is that these economic forces are driving consolidation in the TV industry.
Building large broadcast groups allows co-owned TV stations the critical mass necessary to negotiate difficult retrans deals against the much-larger cable and satellite operators, and, where necessary, to withstand the economic impact of a retrans impasse when it happens. Similarly, larger TV groups are better positioned to negotiate the best possible programming deals with their networks (keeping in mind that “best possible” isn’t necessarily the same as “good”).
Single stations and small station groups routinely have to punch well above their weight by employing smart executives and counsel with deep experience in retrans negotiations to survive in this increasingly harsh environment. That is what makes the FCC’s prohibition earlier this year on certain joint retrans negotiations, as well as current efforts on Capitol Hill to broaden that prohibition, so perverse. By eliminating one of a small broadcaster’s best options for cost-effectively negotiating viable retransmission agreements, the government is pushing those broadcasters to sell their stations to a larger broadcaster (or some would say, to the government itself). In the current environment, a station that fails to sell to a larger broadcaster possessing the skill and mass necessary to effectively negotiate retransmission agreements risks losing its network affiliation to just such a station group, precisely because that group can frequently deliver better retrans results.
So as you send out your elections this year, keep in mind that while the election process itself hasn’t changed, what you will need to do afterwards has changed dramatically. More to the point, think hard about what you need to be doing with your retrans negotiations if you still want to be around in three years to send out that next batch of election letters.