Cable and satellite companies negotiate with local broadcasters for the right to retransmit their signals in a process known as retransmission consent. Terms can include cash payments, barter and advertising. This compensation is critical to local TV stations' ability to provide local news, community and emergency information, as well as top-quality entertainment. Recently, certain cable and satellite companies have waged an aggressive lobbying effort urging the government to weigh in on these private, market-based negotiations in an attempt to avoid fairly compensating broadcasters, who produce the highest-rated content on television.
Congress recognized that local TV stations should be allowed to negotiate for retransmission consent in the 1992 Cable Act, legislation that intended to promote competition in the video marketplace. Prior to this law, cable operators used broadcast signals without stations' consent and resold the signals to subscribers, making millions.
The current free-market process provides incentives for both parties to come to mutually beneficial arrangements, which is why negotiations are completed with no service interruptions or fanfare the great majority of the time. In the handful of instances where agreements are not easily reached, there is a distinctive pattern: more than 90 percent of the time in the last two years there was an impasse, it involved Time Warner Cable, DIRECTV or DISH - the same big companies begging for government intervention.
These big pay-TV companies are urging policymakers to change the retransmission consent system simply because they don't want to fairly compensate broadcasters for use of their signals. They claim that broadcast retransmission fees are responsible for higher cable bills. The truth is, cable bills have risen faster - sometimes double - than the rate of inflation since 1999, long before broadcasters received cash compensation for their signals.
Despite having the highest-rated programming on television, broadcasters have routinely been the least compensated by cable and satellite companies. Wells Fargo analyst Marci Ryvicker estimated that if broadcasters received retransmission consent payments at a rate comparable to what is paid to cable networks, broadcasters would receive five times their current compensation.
While complaining about programming costs, cable and satellite companies are pocketing big profits. In 2014, DIRECTV had revenues of $33.3 billion, Time Warner Cable had revenues of $22.8 billion and DISH had revenues of $14.6 billion.
In 2011, the Federal Communications Commission (FCC) initiated a rulemaking, requesting comment on retransmission consent issues and laws governing TV carriage, which remain open. The FCC is currently entertaining multiple petitions that propose to upend the current system by precluding contractual distribution rights - currently enforced through network non-duplication and syndicated exclusivity rules - and restricting the ability of broadcasters to freely negotiate for retransmission consent compensation.
Additionally, as part of the Satellite Television and Extension of Localism Act Reauthorization (STELAR), passed at the end of 2014, the FCC must initiate a proceeding to re-examine aspects of its retransmission consent good faith negotiation requirements. Included in this assessment is the "totality of circumstances" test, which determined whether parties negotiate retransmission consent in good faith. Cable and satellite distributors are expected to actively participate in this proceeding and use the opportunity to raise broader retransmission consent issues.
Broadcasters strongly oppose government intervention that would upend the retransmission consent system solely for the benefit of the big cable and satellite companies. The retransmission consent negotiations process is fair and market-driven. Eliminating broadcasters' ability to negotiate for the value of broadcast signals would mean less choice for viewers and fewer resources for stations to dedicate to local news, public affairs programming, coverage of emergency weather events and community activities.
Congress and the FCC should allow broadcasters and cable and satellite operators to continue to conduct private, market-driven negotiations for retransmission consent and avoid tilting the scales in favor of either party. Government intervention would only disrupt a marketplace that has resulted in more programming choices and services for local television viewers.