Cable and satellite companies negotiate with 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 for 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 has 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 has revenues of $33.3 billion, Time Warner Cable has revenues of $22.8 billion, and DISH has 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. Notably, the FCC concluded that it lacked the authority to impose cable-backed proposals such as mandatory arbitration and forced carriage. In 2014, the FCC modified its good faith negotiation requirements to prohibit joint negotiations of retransmission consent by separately owned television broadcast stations that are ranked among the top four in terms of audience share. The FCC also requested further comment on whether it should eliminate its network non-duplication and syndicated exclusivity rules.
Currently, the FCC is entertaining multiple petitions for rulemaking which propose to upend the current system by restricting the ability of broadcasters to freely negotiate for retransmission consent compensation and establishing a significant role for the government in negotiations. Recently, the FCC requested comments on how the retransmission consent requirement and good faith negotiation rule should apply to Internet-based or "over-the-top" video distributors.
The Senate Commerce Committee and the House Energy and Commerce Committee have indicated an interest in updating the country's communications laws. Both committees are currently working to modernize the Communications Act to better reflect the 21st century communications landscape. It is expected that the pay-TV industry may use this process to propose changes to the retransmission consent system, tilting the process in their favor.
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 if 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.