Broadcasters step up action on retransmission consent.
Broadcaster action at the FCC increased during the first part of 2012, as broadcasters increasingly looked to the commission to settle grievances with video providers.
Let's review recent broadcaster actions and explore the lessons for video providers, starting with some background on the law at the heart of broadcaster action at the commission.
Under the Communications Act of 1934 and FCC regulations, a video provider may carry a commercial broadcast station in one of two ways: (i) by the station's election of or default to must-carry status; or (ii) by the station's election and express written grant of retransmission consent. With the significant rise in average fees that video providers pay to broadcasters, most commercial broadcast stations elect retransmission consent.
Because retransmitting a broadcast signal requires express written consent, broadcasters and video providers negotiate carriage terms and conditions in retransmission consent agreements. Commission regulations require each party to engage in good faith negotiations and to provide a list of activities that do not meet this standard.
Broadcaster FCC Action in 2012
So far in 2012, broadcaster action against video providers at the FCC has principally involved allegations that a video provider: (i) did not obtain retransmission consent, and thus illegally carried the broadcaster's signal; or (ii) has not negotiated in good faith. The commission has issued two orders based on these broadcaster petitions and complaints.
First, the commission denied one broadcaster's emergency petition asking the commission to determine that a video provider failed to negotiate in good faith. The video provider responded to the broadcaster's original offer with a counteroffer. In response, the broadcaster put forth a different offer. The video provider rejected that offer, obtaining carriage of the network from another broadcast station. Subsequently, the broadcaster attempted to accept the video provider's initial counteroffer, and the video provider explained it was no longer on the table.
In response, the broadcaster filed a petition with the commission. It claimed that the video provider's withdrawal of the counteroffer constituted bad faith, and asked the commission to require that the video provider carry the broadcast station on terms that the provider had previously proposed. Based on the parties' accounts of the negotiation history, the commission denied the petition and sided with the video provider. The commission explained that the broadcaster's subsequent, revised offer constituted a rejection of the provider's counteroffer, making the provider's counteroffer no longer mailable to accept. As a result, the FCC could not later require the video provider to carry the station according to the terms of the provider's initial counteroffer.
Second, the FCC granted two enforcement complaints filed against a video provider carrying two broadcast stations without the stations' express authority. Here, the video provider responded to the complaints by explaining it faced dramatic rate increases. The parties then conferred with the FCC and entered into a retransmission consent agreement. Yet, for the period of time that the video provider retransmitted the stations without an agreement, the FCC found that the provider engaged in unauthorized retransmission and assessed $15,000 forfeitures per signal.
Other complaints filed in 2012 remain pending at the FCC. In one, a video provider claims it no longer needs retransmission consent because it qualifies for a limited exception under FCC regulations. That exception applies to broadcast signals received by an antenna or reception facility owned by subscribers or a building owner, offered to subscribers at no charge, in connection with other services from a video provider. The broadcasters disagree. In another, a broadcaster alleges that the video provider has refused to negotiate, even attempting to reject receipt of retransmission consent election notices, in addition to retransmitting the broadcaster's signal without consent.
These cases demonstrate broadcasters are willing to aggressively pursue retransmission consent claims. Video providers should stay tuned to the final outcome of these actions, as they will likely inform and guide future retransmission consent negotiations.
Lessons for Video Providers Moving Forward
Know the rules. Broadcasters and video providers must follow a detailed set of rules governing elections, negotiations, and carriage. Mistakes by either side can impact carriage rights. Video providers should ensure they create a record of their negotiation history with each broadcaster. As noted above, a clear record of each party's offers and counteroffers can make a difference. As the burden of proof is on the party bringing a good faith negotiation complaint, video providers should be prepared with evidence to support filing a complaint or to challenge a complaint filed against it.
Know the consequences. Unless the broadcaster has elected must-carry status, a video provider must obtain the broadcaster's consent to retransmit its signal. The FCC's base forfeiture for unauthorized retransmission is $7,500 per violation. Unauthorized retransmission across multiple systems could constitute multiple violations. Retransmission without a broadcaster's consent also exposes a video provider to significant copyright infringement liability.
Be prepared and get your notices out. Educate customers. Review the channels offered. Gauge whether the system can drop a channel. If opting to drop a channel, make sure to send the required notices. For a change within a video provider's control, the provider must provide customers with at least 30 days' notice before a service change, and also must provide 30 days' notice to a broadcaster before dropping its signal.
Even though the current retransmission consent election cycle ends in 2014 and most retransmission consent negotiations are complete until then, all video providers should ensure they can defend against potential broadcaster action. We hope the lessons outlined above will help you get started.
The authors are attorneys with the law firm of Cinnamon Mueller Kissel can he reached at email@example.com.
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|Title Annotation:||BUSINESS Matters|
|Author:||Friedman, Scott; Kissel, Adriana|
|Date:||Nov 1, 2012|
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