U.S. signal retransmission debate warms up, hearings expected this summer

Proposed legislation in the U.S. that seeks to fundamentally change the carriage framework for broadcasters and television providers is expected to proceed to a Senate committee hearing this summer, analysts say. Republican Senator Jim DeMint (South Carolina) and Republican Representative Steve Scalise (Louisiana) introduced the Next Generation Television Marketplace Act last December. The bill would repeal some rules of the United States' retransmission consent regime for over-the-air broadcast networks by “allowing negotiations for the carriage of broadcast stations to take place in the same deregulated environment as negotiations for carriage of non-broadcast channels such as Discovery, Food Network and AMC,” according to a release issued when the bills were introduced last year in the Senate (S.2008) and House of Representatives (H.R.3675). The U.S. retransmission regime gives over-the-air broadcasters the power to pull their signals if carriage negotiations fail. An official with the committee said that plans are under way to hold hearings on the cable industry in July but the timing is not finalized and they may not be specifically on the legislation. Dennis Wharton, executive vice-president of communications for the U.S. National Association of Broadcasters, said in a phone interview that the bill will not encourage a free and open marketplace, as its proponents say. “We think it’s a free market now,” Wharton said. He said during periodic carriage negotiations with TV providers, broadcasters can choose to be considered as a “must carry” channel or go for “retransmission consent.” The former requires TV providers to carry the station’s signal and pay no compensation. Opting for retransmission consent means the broadcaster and TV provider negotiate carriage terms, including financial compensation. Wharton said most mainstream TV stations choose retransmission consent, and either side can walk away from negotiations if terms cannot be agreed to, resulting in a station’s signal blackout, he said The bill being proposed, Wharton said, would allow TV providers to carry broadcasters’ signals without consent, and how compensation would be determined after that remains unclear. “The potential here is to really devastate the financial base of broadcasting,” he said. Wharton said broadcasters oriented toward religious or cultural programming—which usually opt for must-carry status—would be at risk of not being distributed at all because the bill would eliminate the must-carry option. Ross Lieberman, vice-president of government affairs for the American Cable Association, did not fully endorse the bill proposed by DeMint and Scalise. He said in a phone interview that it’s a step in the right direction to have a debate on whether broadcasters' current rights under the retransmission regime are appropriate. “I think the bill is reflective of the viewpoints and ideology of the members that introduced it, but there’s a lot more debate and discussion to be had in the future before we see what the final shape of any legislation will be,” he said. Lieberman said the current retransmission regulations were established in 1992 when cable companies had a more dominant position in the industry. Since then, he said, satellite TV providers, telco TV providers, and, more recently, programming offered via broadband Internet, have given broadcasters more options for distribution, he said. Lieberman said the leverage that the retransmission consent regime gives to broadcasters has allowed retransmission fees to increase about seven times what they were 10 years ago. Under the system, U.S. broadcasters have pulled their signals in disputes with TV providers, sometimes disrupting highly watched programs. That happened in a 2010 carriage dispute between Cablevision Systems Corp. and News Corp. that resulted in parts of the World Series, broadcast by New Corp.'s Fox network, being unavailable to more than three million viewers in New York and other northeastern U.S. cities. A similar, 21-hour blackout took place in 2010 for millions of Cablevision subscribers. The blackout ended 13 minutes into the annual Academy Awards, broadcast by ABC. Walt Disney Co., owner of ABC, had pulled the signal due to a carriage dispute. As the U.S. regime comes under rising scrutiny and criticism, Canada's rules are facing pressure for change. Some Canadian broadcasters are pushing in support of the CRTC's proposal for a similar regime to that in the U.S., called value-for-signal. Kevin Crull president of BCE Inc.-owned Bell Media, said this month that conventional broadcasters cannot earn enough revenues from advertising and that they are “under a real risk right now.” The company said it needs the value-for-signal policy to support its over-the-air stations. Other vertically integrated broadcast companies, including Shaw Communications Inc. and Rogers Communications Inc., which own both conventional TV networks and broadcast distribution divisions, are against the policy and are fighting it at the Supreme Court. Wharton said broadcasters rarely resort to blackouts because there’s too much at stake in advertising dollars and impacts on their audience numbers. Lieberman said broadcast regulation reform may not need to go as far as removing broadcasters’ consent rights. They could address more specifically the problem of high-profile programming being blacked out, he said. “If there’s a showing that the cable operator or the broadcaster isn’t negotiating in good faith—while the FCC is deciding whether or not they’ve been negotiating in good faith—neither the broadcaster can pull the signal nor can the cable operator drop it,” he suggested. “There’s lots of different ideas out there on how to deal with it.” Jeffrey Silva, senior policy director for telecommunications issues for Medley Global Advisors in Washington, D.C., said the proposed legislation would have a negative impact on broadcasters. “That whole formula for retransmission would be altered, and most likely there would be negative financial consequences for broadcasters,” he said. Silva said there is a perception among TV providers and specialty channels—many of which fall under the same ownership—that conventional broadcasters enjoy an unfair advantage with the power to pull highly watched programming. Wharton said the proposed bill would eliminate blackouts due to retransmission right disagreements but he warned of other “service disruptions.” The current framework includes compulsory licensing for programming, and the bill would repeal that, requiring television providers to reach separate agreements for the rights to programming, he said. Silva said the bill is not likely to get far in the near term. Democrats, who control the White House and the Senate, are unlikely to support a bill initiated by Republicans, he said. With a presidential election this year, politicians are reluctant to make controversial policy changes that are not viewed as high priority, he said. Wharton said he’s “cautiously optimistic” the proposed legislation will not pass. “Up to this point, there hasn’t been much support expressed for this legislation,” he said. news@thewirereport.ca

U.S. signal retransmission debate warms up, hearings expected this summer

Broadcast | June 29, 2012

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