FCC’S Retrans ruling cashes H’w’d out

The Federal Communications Commission yesterday ruled that a broadcast signal of a program is distinct from the program itself. The decision is the latest win for broadcasters over the Hollywood production community.

The decree, which was not unexpected, was among a slew of rules that the FCC adopted as part of its interpretation of the must-carry/retransmission consent provisions of the cable reregulation law.

Congress passed that law last year, giving the FCC the mandate to implement it. Under the new regs, broadcasters are given the option of must-carry protection or retransmission consent.

Must-carry means that a local cable system is obliged to include local broadcast stations — an option would benefit small, independent stations.

Under retransmission consent, a station can negotiate payments from a local cable operator for being carried on the system. Bigger indies and affils may opt for this, confident that they have enough of a following that cable subscribers would protest their absence on a system.

The FCC also ruled that broadcasters have until around mid-June to make the critical decision of electing either must-carry or retransmission consent. (See box for a must-carry/retransmission consent schedule.)

The FCC’s decision to label the broadcast-station signal as a distinct new property right is another victory for broadcasters in the battle over retransmission consent.

The Motion Picture Assn. of America had battled furiously to block the provision during last year’s cable rereg fight, arguing that retrans trampled on the copyright interests of programmers.

MPAA claimed TV viewers turn on their sets to watch programs, not the station signal, and that therefore producers who make shows should automatically be entitled to share in any revenues from retransmission consent. Congress didn’t buy the MPAA line last year, and the FCC — which rarely ignores the wishes of Congress — didn’t ascribe to MPAA’s position yesterday.

One commission official said, however, that Hollywood should not view the decision as a huge loss, since it’s likely that higher broadcast station revenue stemming from retrans will flow back to programmers in the form of higher prices paid for TV shows.

The FCC also said broadcasters “may bargain away their retransmission consent rights,” but that any bargaining “must be for … the entire signal and not for individual programs carried on the signal.”

That means a broadcaster or cable operator would be barred from negotiating retransmission consent rights to one “hot” program such as “Murphy Brown.” Rather, a retrans deal would involve the broadcast station’s “entire signal,” the FCC said.

It’s unclear what impact the FCC decision will have on existing and future program contracts.

It has been widely reported that programmers such as Disney and Warner Bros. are attempting to rewrite contracts to prohibit TV stations from carrying their shows without first waiving their rights to retransmission consent.

Take it to court

FCC said it expects program contract disputes to be resolved in court.

MPAA said in a statement that it believes retransmission consent “will ultimately be overturned by the courts.”

The FCC also ruled yesterday that existing superstations such as WTBS and WGN will not be permitted to bargain for retransmission consent.

However, “distant” stations that are not superstations may dicker for retrans. Example: Baltimore TV stations that are carried by D.C. cable systems are given full retransmission consent rights under the new FCC rules, even though they would not automatically qualify for must-carry.

“Wireless” cable operators and other competitors to traditional cable providers will also be subjected to retransmission consent mandates, per the FCC.

Broadcasters happy

Broadcasters praised the FCC interpretation of the new must-carry/retrans rules. National Assn. of Broadcasters prez Eddie Fritts said he is “pleased the Commission appears to have adopted rules that reflect Congress’ specific mandate.”

Fritts said broadcasters “hope to work cooperatively with the cable industry to ensure as smooth a transition as possible to the new environment created by the rules.”

Assn. of Independent Television Stations head Jim Hedlund claimed the new rules “should put an end to Cablevision’s renegade guerrilla tactics of dropping TV stations from the cable systems in Connecticut, Massachusetts and New York.” He was referring to Cablevision of Connecticut, which announced it would cherrypick from among the four local stations and carry New York stations instead.

National Cable Television Assn. prez James Mooney said the regs “do not come as a surprise” since they were mandated by Congress.

Mooney predicted “upward pressure on cable rates in some communities due to the retransmission consent provision, and the dropping of some cable channels to make way for broadcast channels of marginal interest due to the must-carry provision.”

The FCC also passed new national customer service standards for the cable industry yesterday. The standards are similar to voluntary guidelines adopted by NCTA two years ago. However, the FCC allows municipalities to toughen the standards if they so desire, a prospect that will surely cause heartburn in the cable industry.

Finally, the FCC adopted “anti-buythrough” rules that require cable operators to make premium channels such as HBO available to subscribers without requiring them to purchase mid-level tiers.

Most cable systems have the technology that is needed to carry out the provision, per the FCC. Those systems that can’t comply must do so within 10 years.

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