04/07/2015

Television Retransmission Consent

Congress enacted the retransmission consent statute in 1992 to prohibit cable, satellite, telco, and other pay-TV companies from retransmitting and reselling the signals of local television stations without their consent. The law enables local television stations to negotiate with pay-TV companies in a free and highly competitive video marketplace for the privilege of retransmitting and reselling local television broadcast signals.

The current retransmission consent law reflects Congress’s decision that competitive markets—not the government—should regulate these negotiations between pay-TV companies and local broadcast stations. Since 1992, Congress and the FCC have, on several occasions, reviewed how the retransmission consent process works in practice. Each time, Congress concluded that the current regulatory scheme is balanced, fair, and, notwithstanding the complaints of pay TV companies, working well.

MDCD is urging Congress you not to change or weaken the retransmission consent law.

If local TV stations cannot charge pay-TV resellers competitive market rates for the privilege of reselling their channels, it will jeopardize the ability of local TV stations to continue to invest in top-rated local news, information, and entertainment programming to serve viewers across the State.

The Retransmission Consent Law Is Fair

When the retransmission consent law was enacted in 1992, cable television companies had ceased to serve simply as community “antenna” services and had started to compete head-to-head with local TV stations for national entertainment and sports programming rights, national and local advertising revenues, and viewers. Congress noted that it was inherently anti-competitive and patently unfair to allow cable companies to take local TV station signals, with whom they compete, and resell them without the consent of each station.

As cable companies began to experience competition from satellite carriers, they started asking Congress and the FCC for greater government intervention in the contractual negotiations—including the right to continue carrying broadcasters’ signals without a negotiated agreement or government-mandated arbitration of these negotiations.

The ability of local stations to compete against pay-TV companies for programming would be severely impaired if the so-called “reforms” proposed by pay-TV companies are adopted. These measures would simply give pay-TV companies a government-mandated competitive and financial advantage over local television broadcasters and ultimately jeopardize access by television viewers to local stations’ high-quality, free, over-the-air local television news, public service, entertainment and sports programming.

Broadcast programming continues to dominate the primetime program rankings. During the 2013-2014 television season, broadcast shows accounted for 97 of the top 100 programs. Given that pay-TV companies pay broadcast stations less than they pay for less popular cable networks, broadcast programming continues to be the biggest and least expensive entertainment, sports, and news bargain going for pay-TV companies.

Allowing local TV stations to negotiate with pay-TV companies for retransmission of their signals enables local TV stations to compete fairly with cable and satellite networks (e.g., TNT, HBO, etc.) for the right to acquire and televise expensive, quality programming and to provide local viewers with both diverse entertainment and sports programming and local news and public service programming.

The Retransmission Consent Law is Working

The FCC has never found that a broadcaster has violated the retransmission consent statute or has failed to negotiate with a pay-TV company in “good faith.” The FCC, on the other hand, has found that pay-TV companies have engaged in “bad faith” negotiations and have “abused” the Commission’s processes and have on various occasions flagrantly violated the retransmission consent statute.

Tens of thousands of retransmission consent negotiations have taken place, and countless retransmission consent agreements have been successfully negotiated between local television stations and pay TV companies without controversy or dispute. The occasional report of a public dispute resulting in an interruption of service is a rare exception. A 2010 study concluded that consumers are 24 times more likely to be deprived of television viewing by an electric power outage than by a bargaining impasse between a local broadcaster and a pay-TV company.

In the last two years, 90% of all retrans negotiation impasses have involved negotiations with DIRECTV, DISH or Time Warner—the same companies advocating for governmental intervention while continuing to generate big profits.

Broadcasters continue to reinvest retransmission consent revenues in local news, weather, and emergency coverage. Survey research results from the Radio and Television Digital News Association (RTDNA) reported 719 stations originating local news programming, 27,300 employees in local TV newsrooms, and more than 40% of news directors nationwide expecting to add staff in 2014.

The Retransmission Consent Law Is Not Responsible For High Pay TV Rates

Despite the claims of pay-TV companies, retransmission consent fees paid to local television stations are not responsible for cable and satellite rate increases.

As an initial matter, pay-TV rates have risen faster than inflation since 1999—long before broadcasters began receiving cash compensation for their signals through free market negotiations.

Local broadcast stations have the top-rated television programs, but they are routinely the least compensated by pay-TV providers. In 2013, a Wells Fargo analyst estimated that if broadcasters received retransmission consent payments at a rate comparable to what is paid to cable networks, broadcasters would receive five times their current compensation. Similarly, local TV stations account for some 35% of all TV viewing, yet they receive less than 10% of the total fees paid by cable and satellite to content providers.

Pay-TV large revenues and profits are driven by soaring increases in pay-TV subscription rates that have nothing to do with the relatively small retransmission consent fees paid to local TV stations. Indeed, the higher fees paid by cable and satellite companies for significantly less popular cable and satellite channels are the factors pushing cable and satellite rates higher.

Congress and the FCC should avoid intervening in the market-driven retransmission consent process that is fair, is working as Congress intended, and allows local TV stations to continue to invest in local programming to support their local communities.

* * * * *