Network affiliates to FCC: OTT needs retrans rules

Network-affiliated TV stations are again pushing the Federal Communications Commission to bring some over-the-top video providers under the retransmission consent regime so they will have to negotiate directly with TV stations for carriage.

That push came in comments to the FCC on the agency‘s latest quadrennial review of media ownership regulation.

They tried to get the FCC back in 2020, under former chairman Ajit Pai, to revive the proceeding, also citing the rise of OTT, but to no avail. The idea was originally proposed by then-FCC chairman Tom Wheeler, a Democrat, in 2014.

In asking the FCC to retain the rule against common ownership of two or more of the major national TV networks, the affiliate associations of the Big Four — ABC, CBS, NBC and Fox — said that it was necessary in part to keep the networks from exercising even more power over affiliation agreements.

Citing those networks launch of OTT direct-to-consumer platforms including Paramount Plus, NBCUniversal‘s Peacock and Disney Plus, the affiliates said the balance of power continues to shift to the networks.

“With every expansion of the networks’ reach within the video programming universe, and every platform geared toward direct distribution of their programming to viewers without a role for local affiliates, the power of the national networks grows, while affiliates‘ leverage vis-à-vis their network ‘partners’ diminishes in tandem,” they told the commission.

That power would grow even greater, they said, if networks were allowed to consolidate before negotiating affiliation agreements.

One way to try and tilt the balance back toward local stations, the affiliates suggested, would be for the FCC to follow through on its 2014 proceeding considering whether internet-based distribution should be classified as a multichannel video programming distributor (MVPD) for the purposes of retransmission consent negotiations between TV stations and national distributors.

They pointed out that in that proceeding, the FCC posited: “The ability of networks to achieve online distribution of network programming in a local market, without the need for local affiliates to consent, may give networks some additional leverage in the network affiliate relationship that did not exist in the pre-online video world.”

The affiliates said the FCC has proved prescient since OTT remains outside the retransmission consent regime and online video platforms are not required to negotiate directly with TV stations. Instead, the stations said, the Big Four have cut them out, negotiating with OTTs for their full network lineups and the associated affiliate signals, then presenting those deals to the stations on a “take it or leave it” basis.

“In cutting local stations out of the negotiations for the distribution of their news
and other programming, the networks dictate the value of both subscription (retransmission) and advertising revenues for local stations’ programming,” the affiliates said.

Already Miffed Over DTC
Affiliates have been unhappy for a while over direct-to-consumer OTT deals for network programming, particularly ones that dilute the audience for their local advertising.

They made that point again, in even starker and broader terms: “[T]he network-controlled process results in advertising funds being extracted from local markets and placed into network coffers, local retransmission consent revenues being materially diminished and shifted for the profit of the national networks and their vast cable portfolios, and, in the case of independent non-network affiliated local stations, virtually no distribution.”

They say that unless the FCC brings virtual MVPDs under the MVPD retransmission consent rules, it will perpetuate a market failure that adversely impacts local stations.

The idea behind Wheeler’s 2014 notice of proposed rulemaking (NPRM) was to give over-the top providers offering an online service that mimics a linear cable offering the same FCC-enforced access to vertically integrated programming. Wheeler was trying to promote new video competition to traditional cable, but eventually backed off the item after there was pushback, and an order was never voted on.

The 2014 item would define an OTT that delivers a linear stream of programming as an MVPD. That means those OVDs would have access to content through the FCC‘s program access rules, but also have to negotiate retransmission consent with broadcasters. It would not apply to IP-delivered versions of a cable operators traditional service, to which program access rules already apply.

Exactly which OTTs should be defined as MVPDs and what other obligations or rights might apply beyond that access — such as public, education and government (PEG) channel mandates or exclusivity — were all teed up in the many questions posed in the NPRM.

If the FCC votes to approve the NPRM, it would reverse a tentative, bureau-level conclusion in the program-access complaint involving Sky Angel, a Christian content-focused MVPD. That decision held that having a facilities-based transmission path was necessary to be an MVPD — something cable operators argued was necessary. The FCC tentatively concluded that an MVPD has to have control of both the content and the transmission path — copper, fiber or satellite signals — to be delivering a channel, and that an over-the-top distributor lacks that path since it is not using a facilities-based channel.

Not surprisingly, the networks disagree, and use the OTT platforms that their own online platforms compete against as their justification for preserving the rule.

In a joint filing, NBC, CBS and Fox (ABC did not joint the comments), said flatly that a basic review of the current marketplace leads to the “inevitable” conclusion that the dual network ban is not necessary now or in the future. “Netflix, Apple, HBO, YouTube, and Amazon are just a few of the ever growing list of providers producing and distributing content that competes alongside that of the four broadcast networks saddled with the Dual Network Rule,” they told the FCC.

The networks also cited the siphoning of ads from their networks to digital platforms like Google and Facebook.

They also said that even absent the dual network rule, there would still have to be a fact-specific FCC (public interest) review of any proposed combination of broadcast networks. Next TV