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FCC Proposes Banning Certain Clauses in Carriage Contracts

The FCC is moving forward with a proposal that would ban the use of certain clauses in cable carriage contracts with independent programmers, including certain “most favored nation” provisions and others that restrict independent channels from other types of distribution.

At issue are two types of clauses.

The so-called unconditional “most-favored nation” clauses entitle a cable provider to receive the same favorable contract terms that a programmer has given to another distributor of its channel, but without requiring that the cable provider assume any of the corresponding obligations.

The other clause is known as “unreasonable alternative distribution method,” which prohibits a programmer from putting it on other distribution platforms, like online platforms.

“Such a reality hurts programmers who have fewer ways to grow their business,” Wheeler said.

The commission voted 3-2 to put the proposed rules out to public comment. Commissioners Ajit Pai and Michael O’Rielly voted against it.

Pai said that what the FCC is proposing it to extend, “on an industry-wide basis, restrictions on programming agreements agreed to by the Department of Justice and a single company during a merger proceeding.” He was referring to restrictions placed on the recent merger of Charter Communications with Time Warner Cable.

Clyburn outlined how the most-favored nation clauses have hurt independent programmers.

She said, “What if you were told, that to strike a carriage deal with a traditional pay-TV provider, you must agree to a clause that will forever prevent you from striking similar agreements in the future, with online video distributors or what we call OVDs? These are very real scenarios independent programmers face each and every day.”

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