Satellite Market Modification Item Watched by Broadcasters

A draft FCC rulemaking notice seeking comment on permitting modification of TV markets for satellite carriage is being watched closely by broadcasters, several broadcast attorneys told us. On the agenda for Thursday's FCC meeting, the NPRM seeks comment on how the FCC should implement Section 102 of the 2014 Satellite Television Extension and Localism Act Reauthorization. Though satellite industry officials told us they expect the measure to be noncontroversial, broadcast industry attorneys said the item has the potential to affect retransmission consent negotiations.

The item is a satellite analogue to market modification on the cable side, and is also intended to address the issue of “orphan counties” -- areas in one state that fall into a designated market area primarily based in an adjoining state -- several satellite industry officials told us. Residents of an orphan county may receive news broadcasts primarily concerned with the state where their DMA-determined local broadcaster is based instead of news relevant to them, the satellite officials said. According to Section 102 of STELAR, the FCC is to consider, among other things, whether modifying a DMA would “promote consumers' access to television broadcast station signals that originate in their State of residence.”

The NPRM seeks comment on how much the satellite version should resemble the cable market modification process, what entities can request such a market modification, and how to define when it isn't “technically or economically feasible” for a satellite company to deliver a different broadcast station to an area, an FCC eighth-floor official told us. Industry officials told us they don't expect the NPRM to be much different from the STELAR provision.

The proposed rule change could give satellite companies more leverage in retransmission consent negotiations, broadcast attorneys told us. Since it would allow a satellite company to carry the signals of a more-distant broadcaster, it could be seen as providing an alternative during a thorny retrans negotiation, the attorney said. However, modifying the market in that fashion would still require FCC approval, possibly making it too burdensome to be an effective threat, some industry officials suggested.

Though Thursday's item is merely an NPRM, the item's basis in STELAR means there may not be much wiggle room for broadcasters when the rule change is ultimately implemented, one broadcast attorney told us. STELAR requires the FCC to implement the provision within nine months of the law's December enactment.