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FCC Sides with MVPDs, Puts Limits on Stations in Retrans Negotiations

The FCC on Monday passed a rule that prevents many TV stations from jointly negotiating retransmission consent payments for their signals from cable and satellite operators.

The order prohibits two or more of the top four stations in a market from coordinating their negotiations. According to an FCC official, so-called “retrans” payments from MVPDs to local stations have ballooned in recent years, rising to approximately $2.4 billion in 2012, from around $28 million in 2005. William Lake, chief of the FCC’s media bureau, said that the change “will help ensure that retransmission negotiations will be fair and effective.”

“Make no mistake about it, Congress said that broadcasters should be able to charge fees. All we are doing is leveling the negotiating table,” said FCC chairman Tom Wheeler.

The order, which passed on a 5-0 vote, was hailed by smaller cable operators, who have long argued that such joint negotiations put them at a competitive disadvantage. Broadcasters have fought any changes to the current retrans regulations.

“Available evidence shows that TV station collusion increases the average price of retransmission consent by at least 18%, leading to higher prices for consumers — an economic reality that the FCC understands quite well,” said Matthew Polka, president and CEO of the American Cable Assn.

“ACA’s tireless effort to end this precise practice has been justly rewarded with the relief the FCC adopted today.”

An FCC official said that the joint negotiations have allowed broadcasters to obtain higher fees than they otherwise could impose.

FCC commissioner Mignon Clyburn noted that retrans fees are responsible for driving up cable bills. The average cable bill was $86 per month in 2011, and is expected to rise to $123 in 2015, she noted.

Commissioner Ajit Pai said that the joint negotiations “violates (stations) statutory duty to negotiate in good faith,” but he also said that such a rule should not mean that the FCC would be wading into further oversight of the private negotiating process.

The National Assn. of Broadcasters, however, challenged the notion that they were responsible for higher cable TV bills, a blame game that is only escalating as operators like Time Warner Cable begin charging customers an itemized “broadcast TV fee” to carry local channels.

“Pay TV companies have been raising rates more than twice the rate of inflation the last 20 years, according to Consumer Reports,” said NAB spokesman Dennis Wharton. “The notion that a punitive crackdown on local TV stations will lead to lower cable rates is simply not credible.”

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