One of the most contentious issues in the video industry today is retransmission consent. FCC Chairman Wheeler just jumped into the middle of it. The practice, where video service providers (VSPs) and local broadcasters negotiate a per-subscriber fee for the delivery of local stations to VSP subscribers, is broken, to put it mildly.
VSPs, especially smaller providers, argue that retransmission is hardly a negotiation. It’s a take it or leave it stance by local broadcasters, they argue. Broadcasters argue that they are simply attaching a fair market value to the high cost of programming and ‘localism’ that their stations provide. This practice often leads to very contentious negotiations, often resulting in black outs, where VSP subscribers can’t receive local broadcast channels – at least temporarily.
Retransmission fees have risen dramatically. SNL Kagan forecasts total retransmission fees to reach $10.3 billion by 2021, up from a projected $6.3 billion this year. Those fees ultimately flow to subscriber monthly bills, and many argue is a main culprit in rising monthly end-customer video bills.
VSPs have asked the FCC to intervene. It looks like they got their wish, sort of. FCC Chairman Tom Wheeler is circulating some proposed rule changes that will weigh in on this issue.
Retransmission Reform
One proposed change attempts to add leverage to the negotiation process, in favor of VSPs. Wheeler is proposing that current FCC rules that prohibit a VSP from bringing another broadcaster signal into a local market be rescinded. This would allow a VSP to potentially replace programming that could be lost, if they are unable to reach a deal with the incumbent local broadcaster – the so called “distant signal” approach.
“I am also putting forth an order that proposes elimination of outdated ‘exclusivity rules,’” said Wheeler in a blog post outlining the proposed changes. “These rules prevent an MVPD from providing subscribers an out-of-market broadcast station, for example, when a retransmission consent dispute results in a local station being dropped from carriage.”
Of course, VSPs would have to find and negotiate with a willing party to get that distant signal. Should a situation like this arise, it will be interesting to watch. The NAB represents local broadcasters and they’re not happy with this proposal. I assume their members will close ranks on this and it could be difficult to find a willing partner to provide that ‘distant’ signal. But maybe not.
Wheeler also says he wants to examine the “good faith” negotiation process that both parties of a retransmission consent agreement are supposed to abide by. He says he wants to review the “totality of the circumstances test” and ensure “…that these negotiations are conducted fairly and in a way that protects consumers.” It’s not entirely clear what, if any, outcomes or enforcement practices will come from this review.
