MVPDs: Proposed Blackout Rebate Program Is Unworkable

“Cable operators do not -- and cannot -- guarantee subscribers that specific programming will always be available,” NCTA said. Many cable and satellite operators already offer subscribers credits due to blackouts, ATVA said. “The market offers them plenty of incentive to do so.” The proposal singles out MVPDs when online video providers also must pull content due to carriage deals being negotiated, NCTA said. “Netflix does not change its price every time it adds or removes a title,” Verizon said.

The proposal would increase the negotiating leverage of programmers and broadcasters, and that would mean higher prices for subscribers, ATVA said. The proposal would raise prices for all subscribers, “while only a subset of subscribers, those who highly value the lost channels, are potentially affected” by a blackout, Dish said.

The 1992 Cable Act bars the FCC from rate regulation, said Verizon, NCTA, Dish and numerous other commenters. Yet the FCC has argued the proposal for blackout rebates is a customer service standard rather than rate regulation. However, the MVPD groups disagreed. “This attempt to radically expand the Commission’s authority runs contrary to the text of the statute, the legislative history, and the Commission’s own precedent,” said Verizon. The proposal would also run afoul of rules barring the FCC from regulating content, NCTA said.

Nearly all the MVPD commenters said the proposal was unworkable because it's too difficult to determine the value of the lost channels in a subscription bundle. “It would result in a blunt instrument that overcompensates some subscribers while undercompensating others," Dish said. Calculating a rebate based on actual per subscriber rates would expose confidential business information, which most retrans deals bar, NCTA said. The NPRM seeks comment on whether customers would be entitled to rebates in perpetuity if an MVPD and programmer never reach an agreement to end a blackout, Verizon noted. “The absurdity of these questions underscores the absurdity of the proposed regulation.”

The New York State Public Service Commission, nearly the only commenter advocating for the NPRM, proposed a method for calculating rebates. Divide “the total cost the video provider paid to the network owner for the programming by the number of affected subscribers, pro-rated to the daily amount for the billing period,” NYPSC said. That amount should be automatically credited to subscriber bills on a per-day basis for the blackout's duration, the filing said. “Consumers should not be paying for services they are no longer receiving due to contract negotiation disputes,” said NYPSC.

Several MVPDs argued that broadcasters are the true cause of blackouts and that the FCC should take action against them instead of enacting rebates. Dish proposed retrans changes, such as barring broadcasters from bundling programming in retrans deals and allowing MVPDs to import out-of-market signals during blackouts. If the FCC does require rebates, it should require the disclosure of the per subscriber retransmission cost of that channel and the price increases proposed during the retrans negotiations that led to the blackout, NTCA said. The agency should also bar broadcasters from receiving retrans payments for the period of a blackout, said NTCA. It would be “a heads-I-win, tails-you-lose proposition” to compel MVPDs to rebate customers and pay broadcasters for content that was never distributed.

NAB didn’t take a position on rebates but said that MVPDs’ unwillingness to compensate their customers for lost content should invalidate MVPD arguments in other proceedings that stiffer broadcast ownership rules lead to lower subscriber fees. “The very existence of a proceeding evaluating whether to require pay TV providers not to charge consumers for services they are not providing belies pay TV claims that increased broadcast regulation will improve outcomes for consumers," said NAB.