NAB accuses FCC of ignoring consolidated cable industry in retrans review

With the FCC beginning on Tuesday its review rules governing retransmission consent negotiations between pay-TV operators and broadcasters, the National Association of Broadcasters accused the agency of ignoring the influential, consolidated market power MVPDs already have.

"While broadcasters remain hobbled by analog-era ownership rules, MVPDs grow and combine, creating mega-players that dominate both the pay-TV and broadband marketplaces," the NAB said in comments.

"Following the Charter/Time Warner Cable/Bright House merger, the top 10 MVPDs will control a whopping 94 percent of the nationwide MVPD market (measured in terms of subscribers), with the top four MVPDs controlling 79 percent of the market and the top three alone controlling two-thirds of the video delivery universe," the NAB added.

The review of the so-called "totality of the circumstances test," which determines if the parties in a retrans deal are negotiating in good faith, comes after passage by Congress last year of the Satellite Television Extension and Localism Act Reauthorization (STELAR) Act. That law mandates that the FCC examine and modernize rules governing the video industry. 

In announcing the review in September, the FCC said that broadcasters have considerably more leverage in retransmission talks than they did in 1992, when the current rules were formed. With the emergence over the last two decades of satellite and telco-based pay-TV services, consumers simply have more choice when a local station is blacked out amid a retransmission dispute. 

That, of course, is not the reality the NAB rhetorically sketched out Tuesday. Again, the group suggested that the FCC has to examine the sheer size of some MVPDs

"Pay-TV providers now have an unprecedented number of options for programming content beyond broadcast channels to offer their subscribers," NAB said. "These MVPDs -- which have market capitalizations as much as 200 times larger than the market caps of even some of the biggest local broadcast TV companies -- possess significant leverage over most broadcasters in retransmission consent negotiations. This competitive disparity fundamentally shapes the negotiations between providers that control the vast majority of the market, such as AT&T/DirecTV, Charter/Time Warner/Bright House, Verizon and DISH, and local broadcast groups, such as Graham Media, Morgan Murphy Media, Northwest Broadcasting and many, many more. These pay-TV companies can easily afford to spread their costs among markets, and if playing hardball in a negotiation causes them to drop a broadcast signal during a dispute, then so be it."

Not surprisingly, the NAB's comments didn't occur in a vacuum, with the pay-TV effacing American TV Alliance responding with this statement: "Broadcasters deliberately black out consumers and hold programming for ransom to extract massive fee increases that are ultimately borne by consumers. From eight TV blackouts in 2010 to 189 so far this year affecting 12 million American homes -- one of every eight pay-TV subscribers has been affected. Retrans fees have increased 22,400 percent in the past decade, and more troubling, gone up 40 percent each of the last 3 years."

The ATVA's statement was followed by a release from member company Dish Network (NASDAQ: DISH): "The evidence is in: The system is broken and customers have been left paying the price through broadcaster blackouts and skyrocketing retransmission consent rates. The FCC needs to update the good faith rules to protect both consumers and competition."

For more:
- read this NAB filing

Related articles:
FCC Media Bureau chief Bill Lake: Time to end 'outdated' exclusivity rules
FCC's Wheeler thrills pay-TV operators, proposes removal of exclusivity rules from retrans negotiations
FCC votes to review definition of good-faith broadcast retransmission negotiations

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