Dish/Sinclair Interim Carriage Mandate Averted By Coming Deal

Interim carriage could have been back in FCC consideration as it briefly faced the largest broadcast blackout in history, experts told us. That was averted Wednesday night when the FCC and both companies in a retransmission consent dispute said carriage would resume amid finalization of a new deal. A statement by Chairman Tom Wheeler earlier Wednesday indicated that, along with getting more directly involved in the loggerhead negotiations between Dish Network and Sinclair, the agency also might be willing to go beyond that.

The Sinclair/Dish blackout -- with Dish customers losing access to 129 stations in 79 markets in 36 states and D.C. -- illustrated the need for the FCC to involve itself directly in broken-down retrans negotiations through "baseball-style arbitration" and requiring interim carriage, and Wheeler having the Media Bureau get involved in the negotiations might indicate a willingness to do so, John Bergmayer, Public Knowledge senior staff attorney, told us. Dish later put on hold its FCC complaint against Sinclair.

Such an interim carriage move would have surely faced opposition from broadcasters. One broadcast attorney told us they don't believe the FCC has the power to require interim carriage because Section 325 of the Communications Act gives the power only to allow or deny retransmission to broadcasters. Multichannel video programming distributors (MVPDs) pushed for interim carriage rules in 2010 when the FCC was soliciting input on possible retransmission consent negotiation rule changes, and it was part of the failed bipartisan Local Choice Act introduced last year (see 1409230036).

Any per se interim carriage rule was unlikely because just last year the FCC raised concerns about its legal authority to impose it, Jonathan Allen of Rini O'Neil told us in an email. But the Dish/Sinclair clash will likely "play a major role in framing the debate" about elimination of the network non-duplication and syndication exclusivity rules, Allen said. "Raising the stakes in this way [with Media Bureau involvement] is noteworthy -- to date, the FCC has rarely intervened in retransmission consent disputes," he said. "In fact, some have raised questions about the scope of the FCC’s authority on these matters."

Dish and Sinclair met with the Media Bureau staff at Wheeler's request, to present their cases while the bureau tried to decide if either side isn't negotiating in good faith. Along with announcing the Media Bureau involvement, Wheeler on Wednesday said in a statement the agency "will not stand idly by while millions of consumers in 79 markets across the country are being denied access to local programming." Pointing to the proposed rules being floated on the eighth floor, Wheeler said "the facts surrounding this dispute inform our findings in that proceeding, but we will not wait to act on behalf of consumers." Later Wednesday, Wheeler praised both sides for resuming carriage.

The Dish/Sinclair clash is exactly what the broadcast industry has been warning of -- MVPDs creating retrans consent disputes that deliberately lead to blackouts, just to get regulator and lawmaker attention for a problem they are creating (see 1507140021), the broadcast attorney said. In a statement, TVFreedom said the blackout "executed by Dish is deliberately timed to create hysteria and persuade the FCC to alter rules to give them a regulatory advantage. That’s typical behavior for Dish, which just lost its $3.3 billion bid to manipulate the AWS-3 auction" and was involved in four of the 13 retransmission consent disputes that have resulted in blackouts this year.

While it and Sinclair earlier reached an agreement on rates and terms for carrying the Sinclair local stations, Dish said the broadcaster insisted on tying retransmission consent to agreement on terms for future carriage rights of a cable network that Sinclair doesn't yet own. Sinclair also has been negotiating for at least eight stations not under its de jure control but in markets where there's at least one station under direct or indirect common de jure control with Sinclair, though Sinclair has Local Marketing Agreements or Joint Sales Agreements with the stations, Dish said. In its 79-page complaint filed and posted Wednesday in docket 12-1, Dish sought a ruling that Sinclair isn't negotiating in good faith; an injunction stopping Sinclair from tying carriage of the cable network with Sinclair's local stations; and an injunction stopping Sinclair from negotiating on behalf of stations it doesn't control. Sinclair's tying of the cable network carriage and affiliate fees is arguably a violation of the Sherman Act, Dish said in its complaint: "The uniqueness of the local programming of and, in many cases, the market share of the Sinclair stations, gives it substantial economic market power to leverage carriage [of the cable network] and force unreasonable and uncompetitive terms."

Sinclair said it regretted any inconvenience to Dish subscribers. In a statement Wednesday, Michael Calabrese, director of the Wireless Future Project at the New America Foundation’s Open Technology Institute, said the FCC "needs to end these consumer blackouts by imposing a system of alternative dispute resolution that includes mediation and baseball-style arbitration if needed.”

Commissioners, meanwhile, are considering an NPRM on retrans that would review both its totality of circumstances test for good-faith negotiations and whether a variety of practices might constitute a per se good faith violation (see 1508140031). Retrans negotiation practices under the microscope range from broadcasters ceding negotiating rights to tying arrangements.

Given that retrans examination, "Sinclair's actions sound crazy," BTIG analyst Richard Greenfield wrote investors Wednesday. The broadcaster might be trying to launch a cable network as a revenue stream that won't be shared with broadcast network parents, or Sinclair's stance might be a mix of greed and arrogance, Greenfield wrote. "With NFL opening day looming, Sinclair probably believed that Dish would simply capitulate to anything it demanded at the last minute," he said. "Unfortunately for broadcasters, the end result may not simply impact Sinclair -- it could very well lead to a reform of retransmission consent negotiations that helps level the lopsided playing field."

Numerous small retrans consent clashes never get any agency intervention, though Wheeler's actions in getting Dish and Sinclair to the table might indicate more willingness for the agency to get more involved, Bergmayer said. "Ad hoc is better than nothing," Bergmayer said. One broadcast executive called the FCC's intervention "absurd," as the FCC is interested in this temporary station blackout when the agency is encouraging numerous stations to go off the air permanently through the March incentive auction.