The Federal Communications Commission is considering requiring cable and satellite operators to give customers refunds for TV services via rebates if they’re impacted by channel blackouts. The FCC contend consumers aren’t getting what they paid for in the face of more disputes between distributors and broadcasters or programmers that result in a loss of channels.
The FCC is seeking comment on the proposal, which asks whether and how to require cable and satellite operators to issue rebates to subscribers hit with channel blackouts. It also seeks input on other questions, including whether any other entities should be required to provide rebates, if the proposal should apply to any channel that’s blacked out, and how rebates should be calculated. The proposal would apply not only to retransmission consent disputes between cable and satellite operators and broadcasters, but also rebates for channel blackouts stemming from non-broadcast carriage negotiations.
In proposing a rebate, the FCC noted consumers have faced an increasing number of channel blackouts over the past decade as pay TV providers and local station owners or networks clash – and when that happens, customers who pay for certain channels in their TV packages essentially aren’t getting the full services they pony up for each month.
“When viewers lose the ability to watch the local news, their favorite show or sports team on their cable or satellite service because of a retransmission blackout, they are not getting what they paid for. And that’s not right,” said Chairwoman Jessica Rosenworcel in a statement. “That’s why we’re starting a conversation about the best way to ensure that when viewers turn on that screen, they get what they pay for.”
The FCC is asking whether and how to address this “customer service shortcoming,” according to the proposal.
As noted, channel blackouts are not uncommon as distributors and programmers disagree over the latter’s demands often for increased per-subscribers fees from operators for the right to carry or transmit channels to consumers. Increased retrans or carriage fees are usually passed on to consumers by operators through their monthly bills. And pay TV providers seem to be increasingly pushing back, pegging higher rates as unreasonable. Cable and satellite providers in part don’t want to pay and pass on higher programming costs to their customers as MVPDs are already dealing with shrinking subscriber bases in the face of rising TV bills and expanded options for other, often cheaper, TV services in the market with the advent of streaming. On the flip side, broadcasters and networks typically contend that they’re seeking fair market-based rate increases for the cost of carrying their programming. Some operators like Charter have indicated they’re unwilling to pay higher fees, arguing they result in larger and pricier TV packages that not all consumers want.
When a distributor and broadcaster or programmer can’t reach new or revised retransmission consent or carriage terms before a contract expires, the MVPD is forced to drop channels, resulting in a loss of programming for consumers, often until a new deal is reached.
The latest retransmission consent dispute was seen between DirecTV and Tegna, where since November more than five dozen local ABC, CBS, Fox and NBC affiliates where unavailable to the pay TV providers’ customers in 51 market. The two companies just reached a deal over the weekend, restoring programming from 64 Tegna-owned stations to DirecTV systems.
In a carriage negotiation example, over the summer Charter Communications and Disney had a major dispute that saw cable channels including ESPN temporarily dropped for the cable operator’s more than 14 million customers. During the dispute Charter emphasized a broken pay TV model and proposed a new type of deal it said would both support Disney’s streaming efforts and create a path forward for linear. Charter and Disney eventually struck a new carriage deal, which in addition to certain linear channels included access to Disney’s ad-supported apps at no extra cost for subscribers of certain Charter Spectrum TV packages.
FCC Commissioner Geoffrey Starks supported the proposal and in a statement cited S&P Global data that there were 24 retrans blackouts in 2019, lasting 171 days and affecting more than 20 million subscribers. The commissioner said he appreciated the inclusion of additional factors the proposal looks to address, including why there are an increasing number of channel blackouts, whether the availability of streaming including live options from vMVPDs has impacted the amount and length of blackouts, and whether programmers with certain types of content – such as sports – are more likely to have failed negotiations. He also noted that rebates are already sometimes offered by pay TV providers.
“I was also pleased to learn in meetings with MVPDs that many providers offer some form of rebate or credit for blackouts already, so the item now seeks to learn more about current practices in the marketplace,” Starks stated. “This information will guide us as we determine how any potential rebates should be structured.”
However, not everyone is on board with the proposal.
Commissioners, ATVA push back
Commissioners Nathan Simington and Brendan Carr each issued dissenting statements on the proposal.
Carr questioned the commission’s legal authority, asserting the proposal is a form of rate regulation outside of the FCC’s scope. Simington also questioned the FCC’s authority, but beyond that emphasized in a statement that he believes even with legal ability the commission shouldn’t impose, as the item “costs consumers more and doesn't help anyone.”
“Let me be clear: there are no innocents in the retransmission consent negotiation. Broadcasters and MVPDs alike are sophisticated actors negotiating over creation and distribution of valuable IP for which each needs (never mind deserves) to be compensated,” Simington stated. “Public-spiritedness doesn’t power antennas or bury cable. It is no sin to get paid, broadcasters produce content worth the price, and blackouts, infuriating though they are, are a feature of price discovery. But this item proposes to place a thumb on the scale with zero attendant consumer benefit on the other side of the ledger.”
The American Television Alliance also put out a statement, arguing that the FCC is proposing to penalize the wrong party for channel blackouts – where the organization places blame and burden on broadcasters for retransmission disputes that result in a loss of programming for consumers.
“Every single service disruption involving broadcast stations occurs because broadcasters want consumers to pay more money and cable and satellite providers want consumers to pay less money,” said ATVA spokesperson Cora Mandy in a statement. “So, in proposing to require cable and satellite companies to offer refunds when they refuse to meet broadcasters' outrageous pricing demands, the FCC seeks to punish the wrong set of parties. In doing so, it will cause higher bills for the consumers it hopes to protect.”
According to ATVA there were 200 channel blackouts in 2023 because of retransmission consent disputes. The organization said that since 2010 broadcasters have raised retransmission consent fees by 1,529%.
The proposed channel blackout customer rebate is the latest move by the FCC related to the video marketplace. Last year it moved forward an item that would eliminate early termination fees imposed by cable and satellite operators and proposed requiring “all-in” pricing information in cable and satellite billing and promotional materials.