Broadcasters Face Big Challenges in Saving Syndex, Nondupe Rules

As FCC Chairman Tom Wheeler has set his sights on repealing exclusivity rules, broadcasters increasingly are arguing that compulsory license requirements should go down with them. The likelihood of saving the network nonduplication and syndicated exclusivity rules is questionable, broadcast experts said in interviews Friday.

Wheeler called the rules "outdated" (see 1508180053) but the other commissioners' votes remain up in the air, though Mike O'Rielly and Ajit Pai are likely most receptive to any deregulation, a broadcast attorney said. If an order ultimately does eliminate the nondupe and syndex rules, it undoubtedly would be followed by litigation trying to reverse that move, the lawyer said.

"I fear they are going to go away -- [Wheeler] doesn't lose very often," said Preston Padden, executive director of Expanding Opportunities for Broadcasters Coalition. "The handwriting is on the wall." However, loss of those rules would be moot if broadcasters could also get the FCC to also repeal the compulsory copyright license rules -- which Padden has been advocating for years (see 1309090040). A repeal of the compulsory copyright license means "the need for network non-duplication and syndicated exclusivity [rules] go[es] away," Padden said.

Eliminating syndex and network nondupe in the name of a freer broadcast market ignores that the compulsory license -- which gives multichannel video programming distributors below-market rates -- "was enacted with the understanding that the exclusivity rules would provide a modicum of balance," John Orlando, CBS executive vice president-government affairs, told staffers for Pai and Commissioner Jessica Rosenworcel, according to an ex parte filing Wednesday in docket 10-71. The 1992 Cable Act that set up the retransmission consent structure specifically said any rule elimination that allowed substitution of distant signals on cable systems to replace local stations carrying the same programming is "inconsistent" with the regulatory structure the law set up, CBS said. Any FCC moves should be paused until completion of a GAO report on statutory licenses that was required by the Satellite Television Extension and Localism Act Reauthorization Act, CBS said.

Wheeler announced his exclusivity rules intentions when he said he was floating a rulemaking notice on changes to the totality of circumstances test for good faith negotiations, and proposed changes to AM radio rules. The agency did issue a good faith NPRM Wednesday (see 1509020061), though there were no signs of a draft AM order or any order on exclusivity. The FCC didn't comment. Many of its IT systems were shut down since Wednesday for routine work.

Broadcasters and allies have complained that the rules elimination is aimed at eroding whatever leverage TV stations have, making it easier for MVPDs to import distant signals during blackouts. Many of the arguments filed in docket 10-71 have involved how repeal of the rules could hurt localism (see 1508310026). Those rules are a fundamental part of the way the FCC ensures a local TV broadcast system and their repeal "would provide an unfair competitive regulatory advantage to cable television systems that would ... threaten local stations' ability to provide local programming," a variety of North Carolina, Ohio and Virginia broadcasters told staff for Pai, Rosenworcel and Wheeler, according to a filing Wednesday.

Since the exclusivity rules and compulsory license operate hand in hand, "you cannot eliminate the exclusivity rules without also eliminating the compulsory license," David Donovan, president of the New York State Broadcasters Association, told Pai staffer Alison Nemeth, according to an ex parte filing Wednesday. The nondupe and syndex rules create an enforcement means for stations that have acquired program rights, and axing them "increases the probability that agreements with local stations will not be reached," resulting in more blackouts, NYSBA said. Cable operators would widely opt, in retrans negotiations, to break off talks, drop a station and import a distant signal if not for the exclusivity rules because they would only have to pay a below-market distant signal fee plus whatever costs that distant signal owner charges, NYSBA said. Since programmers don't want the job of being an "exclusivity enforcer," they're more likely to sell content to nationally distributed MVPDs or over-the-top video services instead of to a number of different TV stations, helping "drive top quality content away from the local broadcast system," NYSBA said.