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ACA Urges FCC To Make Clear To TV Stations What It Means To Negotiate In Good Faith

Trade Group Outlines Proposals And Key Steps To Curb Egregious TV Station Conduct

PITTSBURGH, December 2, 2015 - The American Cable Association said the Federal Communications Commission can help protect consumers and promote fair competition by updating its retransmission consent rules to ensure TV station owners comply with their long-standing legal obligation to negotiate carriage deals in good faith with multichannel video programming distributors (MVPD), especially smaller ones.

"The time for decisive FCC action has arrived.  During the past five years, two retransmission consent election cycles have come and gone, and consumers have experienced 558 blackouts and prices have risen about 40% each year," ACA President and CEO Matthew M. Polka said.  "The unreasonable conduct undertaken and proposals offered by broadcasters in their retransmission consent negotiations that are responsible for this harm must come to an end."

The FCC's review was mandated by Congress in the Satellite Television Extension and Localism Act Reauthorization of 2014 (STELAR), a bipartisan measure that in key respects reflects Capitol Hill's frustration with a retransmission consent regime which has unleashed a record-setting number of TV station-initiated blackouts and a runaway rise in the fees MVPDs have been strong-armed into paying by dint of regulatory advantages brazenly exploited by broadcasters.

As part of the FCC's review, ACA conducted an extensive examination of TV station practices harmful to competition and to consumers served by MVPDs.  ACA outlined in its Dec. 1 comments a number of steps the FCC can take to ameliorate the harms of broadcasters' current retransmission consent practices and create a healthier negotiating environment where dealmaking would take place in an atmosphere of honesty, purpose and clarity of process, producing agreements acceptable to both parties.

Specifically, ACA called on the FCC to:

  • Prohibit broadcasters from bundling retransmission consent with carriage of a same-market regional sports network (RSN) or other "must have" programming for the purpose of raising prices, as a per se violation of the duty to negotiate in good faith;
  • Make clear that a broadcaster's refusal to substantiate its bargaining claims during retransmission consent negotiations is a per se violation of its duty to negotiate in good faith;
  • Deem it to be a per se violation of a broadcaster's good faith negotiation obligation for the broadcaster to block an MVPD's broadband Internet access subscribers from accessing the broadcaster's and its affiliated network's publicly available online video programming as a means to gain leverage in negotiations;
  • Prohibit broadcasters from blacking out or threating to blackout a station signal in the time period just prior to the airing of a "marquee" sports or entertainment event as a per se violation of the duty to negotiate in good faith;
  • Affirm that entering into any agreement with a third party - legally-binding or otherwise - that blocks or otherwise influences an out-of-market station's ability to grant retransmission consent to a cable operator that has historically carried the station's entire programming stream, including its network and syndicated programming, is a per se violation of the obligation to negotiate in good faith;
  • Deem conditioning of the grant of retransmission consent with set prices, terms, and conditions for carriage of unlaunched and untested, or in some cases, unidentified programming networks and after-acquired broadcast stations ("prospective programming") to be a per se violation of good faith bargaining; and
  • Deem discrimination by an MVPD-affiliated broadcast station based on vertical competitive effectives to be a per se violation of the duty to negotiate in good faith.

In the alternative, should the FCC decline to recognize these behaviors and proposals to be new per se violations of the good faith obligation, ACA has requested that at the very least they be considered evidence of bad faith under the totality of the circumstances test.

In addition, ACA explicitly asked the FCC to recognize as evidence of bad faith under the totality of the circumstances test that bargaining based on Most Favored Nation (MFN) clauses prevents parties from negotiating in an atmosphere of honesty, purpose, and clarity of process that is designed to produce an agreement acceptable to both parties, and permits a third party MVPD to effectively raise its rival's costs in an unrelated transaction.

ACA's comments concerning the need to re-examine and adjust the FCC's current regulatory presumptions, and the competitive and consumer harms arising from bundling of "must have" programming assets, is based in part on an economic analysis by Professor Michael Riordan of Columbia University.

Professor Riordan demonstrates that broadcast stations, insofar as they are "must have" programming for MVPDs, must be considered monopolistic, rather than competitive, products.  He argues that demands for higher prices based on bundling "must have" broadcast stations with other "must have" programming, like same market RSNs, is not based on competitive marketplace considerations.

"I urge the FCC to act quickly to conclude this rulemaking and the companion retransmission consent reform rulemaking launched in 2011 to better protect consumers and ensure that retransmission  consent negotiations are indeed conducted fairly. The public interest demands no less," Polka said.

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