Letter to The Honorable Julius Genachowski, Chairman of the Federal Communications Commission
Letter
Senator John Kerry (D-Mass.), Chairman of the Commerce Subcommittee on Communications, Technology, and the Internet, today sent a letter to Federal Communications Commission (FCC) Chairman Julius Genachowski with draft legislation to protect consumers during disputes between broadcasters and cable providers that sometimes lead to televisions going dark and often threaten to disrupt service.
For years, Kerry has urged both broadcasters and cable providers to keep TV signals up during their contract negotiations, but in recent years, TV blackouts or threats of blackouts during major events such as the college bowl games and the Oscars have too often been the result of these retransmission disputes.
"It's not our job to take sides, but it is our responsibility to help find a better way forward," said Sen. Kerry. "The goal of this legislation is to offer a path towards resolution that reforms a broken system and protects the consumers who get caught in the middle. I look forward to feedback from the FCC and collaboration and input from all stakeholders. This system today isn't working for anyone."
Kerry's legislation, which he intends to introduce in the upcoming "lame duck" session, would prevent television signals from being pulled until both broadcasters and cable companies have gone through a process with the FCC to ensure good faith negotiations and consider arbitration as an option.
The full text of the letter is below:
October 19, 2010
The Honorable Julius Genachowski
Chairman
Federal Communications Commission
445 12th Street, SW
Washington, D.C. 20004
Dear Chairman Genachowski:
As you know, News Corp. (FOX) and Cablevision failed to reach an agreement on Friday for the retransmission of WNYW (NY channel 5), WWOR (NJ channel 9) and WTXF (Philadelphia channel 29). As a result, approximately 3 million Cablevision subscribers in New Jersey, New York and Connecticut were left without access to these broadcast channels, including the widely watched New York Giants game this weekend. As the New York Times recently reported, these sorts of confrontations are now "a regular event;" indeed, Bloomberg News recently reported that "TV blackouts in the U.S. have reached the highest level in a decade and may climb as pay-TV operators fight higher fees sought by content producers."
Rather than take sides in a conflict of corporate interests, we can all agree that this system works least of all for consumers, the primary interest we represent in matters of public policy-making. I hope you will agree that the current process -- which forces all sides and particularly consumers into lousy choices -- is broken and in need of reform. Currently, either party, sufficiently strong willed, can play a game of negotiating chicken with the consumer caught in the middle. It incentivizes conflict over negotiation.
The voices of angry consumers in this weekend's news coverage speak volumes. Many football fans had to leave home, denied the service they faithfully pay for, and even bring their children to bars to watch the game. As one person, Marilyn Odell, told the New York Times, shouting to be heard above the crowd, "We're too old to be in this place." A separate Associated Press story detailed one of the owners of a bar that depends on its Cablevision subscription complaining, "This is ridiculous!...I'm relying on people to come in who are Giants fans -- and they're walking out, even though I pay for the football package." He went on to say that "regular, everyday people get caught in the middle."
There are important equities and business interests at stake in these negotiations, and in this most recent case, both sides believe they've negotiated in good faith. It's not our job to take sides -- but it is clearly our responsibility to ask whether there's a better way forward as these kinds of situations rise in frequency. In addition to this most recent dispute, just last March, Cablevision and Disney/WABC-TV failed to reach an agreement and the WABC-TV signal was pulled from Cablevision. While that signal was eventually restored, it was only after Cablevision customers were without WABC-TV for approximately 20 hours, including the first 15 minutes of the Academy Awards (Oscars) broadcast. And upcoming retransmission consent negotiations between FOX and the DISH Network which will include thousands of households in Boston and millions nationwide, and in December between Mediacom and Sinclair Broadcasting, could put even more Americans at risk of losing television programming that they have come to expect and rely on for their local news and entertainment.
This spring, you testified before the Senate Commerce Committee that the retransmission consent system was under review and had been since the previous New Year. Further, a petition that seeks to modify the FCC's rules for retransmission consent negotiations has been pending before the FCC since March 2010. The FCC has had sufficient time to consider the comments that have been filed on that petition and begin the process to revise its rules. But in the absence of FCC action, I feel a responsibility to begin to consider the smartest, least intrusive actions to reform the law.
A discussion draft of the legislative language is attached. The process we are trying to effect is two party negotiations that have a big impact on an unrepresented third party; consumers. The goal is to offer a path to potential resolution of differences and protect consumers. It would stave off the termination of carriage on expiration of an agreement and allow signals to continue transmitting until the FCC evaluates the behavior of the parties and recommends or does not recommend binding arbitration during which carriage would continue. At the end of the day, the broadcaster would retain the right to pull the signal when there is a good faith impasse on terms, but it would not be able to do so without much greater transparency in process and a more systemic effort at reaching agreement without consumers getting caught in the middle.
In short, in any broadcaster-distributor negotiation, there are four basic possible impasse scenarios, for which I am considering a new process of resolution as follows. Once both parties agree that they have reached an impasse, they both submit their last best offer for FCC evaluation and:
* Scenario 1 -- The FCC finds that the broadcaster is negotiating in good faith and making an offer consistent with market conditions but the distributor is not. In this case, the distributor shall agree to the broadcaster's last best offer or terminate carriage and the FCC may fine the distributor for negotiating in bad faith. In lieu of termination of the signal, the broadcaster can withdraw the last best offer and ask the Commission to require binding arbitration.
* Scenario 2 -- The FCC finds that the broadcaster is not negotiating in good faith or making an offer consistent with market conditions and the distributor is negotiating in good faith and making an offer consistent with market conditions, then the FCC can require binding arbitration. The penalty for the broadcaster is forced participation in binding arbitration.
* Scenario 3 -- This will be the most likely scenario in most cases. The FCC finds that both parties have negotiated in good faith but reached a true impasse based on an honest disagreement on the value of the signal. In this case, the FCC may request them to submit to binding arbitration. If one party or the other refuses to engage in binding arbitration, then the FCC will provide both parties with a model notice by which to inform consumers of the potential loss of service as well as the difference in offers on the table so that consumers can judge for themselves who was making the fairest offer. This adds a more consumer friendly and transparent way to end transmission of services if necessary and creates an attractive option for arbitration for both parties.
* Scenario 4 -- The FCC finds that neither party is negotiating in good faith, then it can require binding arbitration and fine both parties.
I look forward to working with you on a solution to this problem. If you have an alternative solution or believe you can make the process work for consumers using your regulatory authority, please let me know.
Sincerely,
John F. Kerry
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