FCC's Wheeler thrills pay-TV operators, proposes removal of exclusivity rules from retrans negotiations

In what could be a major victory for pay-TV operators, FCC Chairman Tom Wheeler said he plans to circulate an order that would remove 50-year-old "exclusivity" laws that restrict operators from importing signals from distant stations during impasses with local broadcasters over retransmission fees. 

Wheeler

"In this item, the commission takes its thumb off the scales and leaves the scope of such exclusivity to be decided by the parties, as we did in the Sports Blackout Order last year," Wheeler said in a blog post. "In so doing, the commission would take 50-year old rules off our books that have been rendered unnecessary by today's marketplace."

Broadcast retransmission fees are accelerating quickly and set to reach $9.8 billion by 2020, according to SNL Kagan. As it has sought to identify factors inhibiting growth of the U.S. broadband market, meanwhile, Congress has identified the impact of fast-rising program licensing fees paid by cable companies. The FCC is responding by looking at the rules that govern retrans negotiations.

With exclusivity rules taken out of the equation, an operator like, say, Mediacom would have had decidedly more leverage as negated with station group Media General in July. For its part, Media General pulled 14 network affiliates off the MSO's program grid, depriving Mediacom customers in Midwestern markets access to the Big Four broadcast networks. Removing the exclusivity rules would minimize the leverage created by implementing such a blackout. For instance, in Fort Wayne, Ind., where CBS affiliate WANE-TV was blacked out for two weeks in July, Mediacom would have, under revised laws, been able to deliver its customers in that area a signal from a more distant CBS affiliate.

Not surprisingly, cable operators are thrilled with Wheeler's plan. The American Television Alliance called the chairman's proposal "a step in the right direction."

Also not surprisingly, broadcasters are less thrilled. "Exclusivity rules are a lynchpin of the local broadcast business model and help sustain viewer access not only to high-quality network entertainment programming, but also to local news and lifeline information," said Dennis Wharton, spokesman for the National Association of Broadcasters. "The order currently circulating at the commission imposing changes to these rules would threaten the vibrancy of our uniquely free and local broadcast system. NAB strongly opposes this order that would ultimately cause harm to consumers and their reliance on localism."

For its part, CBS Corp. has had the most publicly aggressive stance on retransmission fee growth, projecting its bounty will reach $2 billion by 2020.

"We have the most watched programming there is anywhere, and we will get paid the appropriate amount for it," CBS CEO Leslie Moonves said Aug. 5 during the company's second-quarter earnings call.

For more:
- read this FCC blog post
- read this Bloomberg story
- read this Deadline Hollywood story

Related articles:
ACA's Matthew Polka tweets to FC about runaway retrans, proliferating OTT, rampant consolidation, more at #ACAMattPolka
Moonves: CBS to make $2B per year in retrans fees and reverse compensation by 2020
Cablevision urges 'robust' changes to retransmission consent rules
Moffett to Congress: Pay-TV program pricing reform needed to spur broadband investment
Retrans fees could reach $6 per sub, broadcasters say

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