FCC to Consider Retrans Blackout Rebates, Reporting Requirement

FCC Chairwoman Jessica Rosenworcel circulated two NPRMs on the 10th floor that would seek comment on requiring MVPDs to refund subscribers affected by programming blackouts due to retransmission consent negotiations and report such blackouts to the FCC within 24 hours, said a news release Wednesday. MVPDs are likely to object to the proposals, which would likely increase pressure on them during retrans negotiations. “Enough with the blackouts,” said Rosenworcel in the release. “When consumers with traditional cable and satellite service turn on the screen, they should get what they pay for,” she said. “If the screen stays dark, they deserve a refund.”

The text of the NPRMs hasn’t been released, and the release says only that one “seeks comment on whether and how to require cable and satellite providers to issue rebates to subscribers in the event of a blackout,” and the other would require MVPDs to notify the FCC “via an online public portal when there is a blackout of 24 hours or more of broadcast programming.” A statement Wednesday from Public Knowledge Legal Director John Bergmayer in support of the chairwoman’s announcement suggested the reporting requirement would be used to amass data on blackouts. “If adopted, the proposal to ensure that blackouts are documented will lay the groundwork for informed decisions that address the root causes of these disruptions.” An FCC official told us that often when the agency splits a matter between two proceedings, it's to protect one policy from being affected by litigation against the other, but it isn’t clear if that's the reasoning in this case.

Cable and direct broadcast satellite interests will likely argue such a refund requirement "is putting the thumbs on the scale in favor of stations," emailed Venable cable lawyer Craig Gilley. He said that in an impasse, such a rule would put revenue from subscriber loss at stake as well as revenue loss from the rebates. He said that makes it more likely MVPDs will agree to higher rates in retrans consent talks, and those rates will be passed on to consumers. Meanwhile, there's no corresponding economic pressure on broadcasters to come to the table under such rules, he said.

“The nation’s independent broadband and cable providers ... hate blackouts as much as anyone," ACA Connects President Grant Spellmeyer said. "Unfortunately, the proposals announced today do not appear to address the root cause of these blackouts: the insatiable demand of broadcasters for outrageous, ever-increasing fees. We urge the FCC to focus on tackling this underlying problem and to avoid proposals that are more likely to make it worse by giving mega-broadcasters even more leverage in their negotiations with smaller cable operators.” "Every blackout -- every single one -- is caused by the same thing: broadcasters want consumers to pay higher prices," the American TV Alliance said, saying the FCC's focus should be on broadcasters forcing retransmission consent fees to skyrocket "rather than just on the companies that are negotiating to keep prices down for their customers." NCTA and NAB didn't comment. Arguments by MVPDs against the rebate are likely to depend on the source of the authority the agency claims to have to impose them, attorneys said. The FCC has broad authority under the good faith negotiation rules that might make it difficult for MVPDs to argue the agency doesn’t have the ability to interfere in their contracts with subscribers, an attorney told us.

“The FCC is absolutely right to think about protecting consumers.” said Goodfriend Group attorney David Goodfriend, who has represented Dish Network, broadcasters and programmers. “The question is, if in protecting consumers, the FCC appears to be taking sides in a dispute between broadcasters and cable operators,” Goodfriend said. "Hopefully there are going to be further efforts to protect consumers by disincentivizing programming takedowns by broadcasters.”

Broadcasters are likely to view the proposal as more favorable to them, but overall they would rather the FCC stayed out of retrans negotiations altogether, said Pillsbury broadcast attorney Scott Flick, who represents broadcasters in retrans negotiations. “The involvement of the government makes negotiations more complex and increases the likelihood of a blackout,” he said. “This is not the sort of proposal the broadcasters have been calling for.” If the FCC becomes more involved in retrans deals, future FCC rulemakings on the matter may not go the broadcasters’ way, he said.

The FCC declined to comment on whether the NPRMs were inspired by the summer’s large-scale retrans blackouts involving Nexstar and DirecTV, and Disney and Charter. Those companies also declined to comment. Attorneys told us it's unusual for the FCC to respond this quickly, and Rosenworcel for nearly a decade has pushed the concept of consumer refunds for blackouts. “It is pretty clear to consumers that something is not right when they turn on the television for the news, their favorite show, or the game, and instead get saddled with a dark screen,” Rosenworcel -- then a commissioner -- said in remarks released with the FCC’s 2014 order tightening joint negotiation rules. “When this happens, I think they are owed a refund.”

"When two major companies fail to reach a deal, consumers are left without being able to access the content they paid for," said Jonathan Schwantes, Consumer Reports senior policy counsel, applauding the NPRM. “To be crystal clear, these disputes are all about money and universally harm consumers." He said the Disney-Charter Communications blackout, settled last month (see 2309110034), "serves as exhibit A for understanding this problem. Because two multi-billion companies could not come to an agreement on a price for carrying Disney’s content, 15 million Charter cable subscribers were denied ABC, ESPN and other channels owned by Disney for more than a week.” Said Public Knowledge's Bergmayer: “The high frequency of cable blackouts should not normalize them": “It’s good to see the FCC beginning to take action on this subject.”