FCC Chairman Signals Mixed Bag of Changes to Media Rules

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 First, the Chairman is proposing to his fellow Commissioners that the FCC adopt an order eliminating what he termed “outdated exclusivity rules”–the FCC’s network non-duplication and syndicated exclusivity rules.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.