Fall Retrans Elections With New US-Wide Effective Competition Worries Broadcasters but Not Experts

By Oct. 2, full-power TV stations need to elect between must-carry and retrans consent for the 2018-20 period. Commercial stations that don't meet the deadline will by default receive must-carry status on cable systems; the reverse is true for direct broadcast satellite, with stations defaulting to retrans consent status.

A broadcast official said industry concerns about cable company approaches were why NAB, with NATOA, sued to challenge the FCC's 2015 effective competition finding. The U.S. Court of Appeals for the D.C. Circuit dismissed that appeal in July (see 1707070013).

American Cable Association President Matt Polka said ACA members don't expect notable changes in broadcaster demands on retrans. The effective competition determination might allow broadcast signals outside the broadcast basic tier, but "the reality is other laws and regulations, when conspiring together, still give the broadcaster the monopoly right to say 'carry it on basic or else,'" he said, citing network nonduplication rules. A bigger change in leverage in retrans talks could be the growth of broadcast content being made available via over-the-top services, since those alternative sources of network signals mean MVPDs might feel less pressure to carry the signals, Polka said. If that shift in leverage does come, it likely will be in a handful of years and not in this fall's elections, he said. NCTA didn't comment.

Some cable operators have argued that because of effective competition status, they don't have to put retrans stations on the basic tier, but stations will fight tooth and nail against such moves, said a lawyer with broadcast carriage experience. A basic tier change would affect must-carry stations more than retrans ones, since retrans stations almost by definition have more negotiating leverage due to their sought-after programming, said broadcast lawyer Dan Kirkpatrick of Fletcher Heald. He also said a cable system might try at some point to make big changes in its basic tier system or push for FCC clarification, but it's unlikely this year.

While conceptually it's possible to move broadcast stations to other tiers, realistically it's highly unlikely given guaranteed broadcaster resistance to any such moves, said Mediacom Senior Vice President-Legal and Public Affairs Tom Larsen. He said it's unlikely cable operators, at least those in secondary and smaller markets, would try to relegate broadcast channels to lower tiers or consider dropping the signals altogether, at least until the over-the-top market is a bigger competitor: "This revolution isn't occurring that fast in Sioux Falls." Larsen said this latest round of elections will likely see a continuation of the trend of cable distributors dropping out-of-market networks, largely due to the costs. He said there likely would be more and bigger programming blackouts due to pricing issues in carriage negotiations.

One problem with moving a broadcast signal to an expanded tier is that revenue from that tier would then be subject to compulsory copyright license fees, said a lawyer with programming and retrans agreement experience. That could mean a substantial bump in copyright expenses for the cable company, and thus will motivate most operators to keep broadcast programming on the basic tier, the lawyer said. A cable operator might want to create an expanded tier of just retrans broadcast signals, but most broadcasters when they negotiate retransmission consent insist on being on a heavily penetrated tier, the lawyer said, and cable operators also generally don't like to change their lineups.