Lawyer Article

Introduction

The Federal Communications Commission has just released a Report and Order implementing the good faith retransmission consent bargaining obligation imposed on MVPDs by Section 207 of the Satellite Home Viewer Extension and Reauthorization Act of 2004 (“SHVERA”). The 1999 Satellite Home Viewer Improvement Act, and Commission rules adopted pursuant to that Act, imposed upon broadcasters an obligation to negotiate in good faith. SHVERA requires the Commission to extend this obligation to MVPDs.

The Reciprocal Bargaining Obligation for Entities Within the Same DMA

The Order establishes the following actions or practices as a violation of the duty of a broadcast television station or MVPD (Negotiating Entity) to negotiate retransmission consent agreements in good faith:

• Refusal by a Negotiating Entity to negotiate retransmission consent;
• Refusal by a Negotiating Entity to designate a representative with authority to make binding representations on retransmission consent;
• Refusal by a Negotiating Entity to meet and negotiate consent at reasonable times and locations, or acting in a manner that unreasonably delays retransmission consent negotiations;
• Refusal by a Negotiating Entity to put forth more than a single, unilateral proposal;
• Failure of a Negotiating Entity to respond to a retransmission consent proposal of the other party, including the reasons for the rejection of any such proposal;
• Execution by a Negotiating Entity of an agreement with any party, a term or condition of which requires that such Negotiating Entity not enter into a retransmission consent agreement with any other television broadcast station or MVPD; and
• Refusal by a Negotiating Entity to execute a written retransmission consent agreement that sets forth the full understanding of the television broadcast station and the MVPD.  

The Commission stated its belief that these obligations will not unduly burden MVPDs and that the rule merely requires that they “comply with the per se negotiating standards … and refrain from insisting on rates, terms and conditions that are inconsistent with competitive market considerations.” It further stated that, given compliance with the foregoing, the mere failure to reach an agreement will not constitute a violation.

In addition to the above, a Negotiating Entity may demonstrate, based on the totality of the circumstances of a particular retransmission consent negotiation, that a television broadcast station or MVPD breached its duty to negotiate in good faith. The Commission stated here that it will take relative bargaining power into account under the totality of circumstances test.

In making this decision, the Commission rejected the NCTA’s argument that the Commission should interpret the statute such as to give MVPDs the right to refuse to enter into retransmission consent negotiations. The NCTA’s position was that “absent an MVPD’s ability to ultimately refuse carriage of a broadcaster that has elected retransmission consent … reciprocal good faith bargaining rules simply turn retransmission consent into another form of must carry but with the possibility of payment in addition.” The Commission found that to adopt the NCTA’s position would render the good faith negotiation requirement a nullity.

The Reciprocal Bargaining Obligation for Entities Located in Different DMAs

The Commission questioned in its NPRM whether the same good faith negotiation standards should apply regardless of the DMA within which the broadcaster and MVPD reside. The Commission concluded that the obligation should apply, but that the obligation may vary depending upon where the broadcaster and MVPD are located. In general, the per se negotiating standards set forth above will apply as will the requirement that the parties refrain from taking positions that are inconsistent with competitive marketplace considerations.

In differentiating the requirements here, the Commission makes the curious statement that “[t]he main difference in these distant reciprocal bargaining negotiations should lie in either party’s ability, after evaluating the prospect of distant carriage and giving full consideration to the proposals of the party requesting carriage, to reject the proposal and terminate further negotiation.” It further stated its position that “distance will play a critical factor in determining whether a party complied with its reciprocal bargaining obligation.” This somewhat suggests that in a same-DMA situation, the parties may not make a similar evaluation and terminate negotiations and tends to confirm the NCTA’s assertion that this new requirement has essentially elevated retransmission consent to must carry status.

Restrictive Network Affiliation Agreements

The Commission declined to take action on requests that it find network affiliation agreements containing provisions restricting an affiliate’s ability to grant out-of-market retransmission consent to be in violation of the rules. Nevertheless, it took the opportunity to state its opinion that such provisions are not restricted by the rules, but suggested it was incumbent on broadcasters subject to such provisions to at least ask the network for a waiver.

If you would like a copy of the Report and Order or have any questions about this client alert or any other issues, please contact Mark Palchick via email or (202) 857-4411 or Howard Barr.