Broadcasters Push FCC to Reconsider Rules for vMVPDs

NRB | May 26, 2022 | Industry News

Representatives of affiliates of the four major TV networks have recently renewed their push to persuade the Federal Communications Commission (FCC) to adopt rules treating on-demand streaming platforms under the same standards as traditional cable and satellite providers.

The Four Affiliates Associations (including ABC, CBS, Fox, and NBC affiliate associations) met with the FCC in April 2022 to emphasize that Big Tech companies must “compensate local broadcasters fairly for the distribution of the broadcasters’ valuable news content on their platforms.”

The issue at hand: whether broadcasters are treated fairly under the differing regulatory regimes governing traditional and broadband video platforms. Over-the-air (OTA), or traditional television transmission, and over-the-top (OTT), or delivery by broadband internet from alternate content providers, are two of the most common platform technologies delivering video content to viewers. OTA and OTT platforms are subject to different regulatory standards and obligations in areas like retransmission consent, emergency alert requirements, political advertising disclosures, and more. Controversy has simmered for years over which regulatory standard to apply to OTT, particularly on the issue of retransmission consent rules. Broadcasters have advocated that the FCC designate Big Tech companies currently classified as virtual multichannel video programming distributors (vMVPDs), instead, as multichannel video programming distributors (MVPDs), like traditional broadcasters, and apply the same retransmission consent rules.

Smaller broadcasters have a key interest in ensuring their ability to negotiate fair compensation for retransmission of their content on vMVPDs. Since 1965, retransmission consent and must-carry rules govern the relationship between MVPDs and broadcasters, requiring cable operators to carry local broadcast television stations. These rules have been frequently altered over the years, and the Cable Television Consumer Protection and Competition Act of 1992 established the rules as they stand today.

As explains,

“The Communications Act prohibits cable operators and other multichannel video programming distributors from retransmitting commercial television, low power television, and radio broadcast signals without first obtaining the broadcaster’s consent. This permission is commonly referred to as ‘retransmission consent’ and may involve some compensation from the cable operator to the broadcaster for the use of the signal.

Alternatively, local commercial and noncommercial television broadcast stations may require a cable operator serving the same market to carry their signals. This demand for carriage is commonly referred to as ‘must-carry.’ If a broadcast station asserts its must-carry rights, it cannot demand compensation from the cable operator for carriage of its signal. While retransmission consent and must-carry are distinct and function separately, they are related in that commercial broadcasters are required to choose once every three years, on a system-by-system basis, whether to obtain carriage or continue carriage by choosing between must carry and retransmission consent.”

But in the case of virtual MVPDs, carriage agreements are often negotiated directly between vMVPDs and networks (or their parent companies), and non-owned affiliates are given the option to simply take or leave the offer—with no involvement in negotiations—if they want to see their content carried on streaming services. Meanwhile, affiliates have seen programming that used to air exclusively on affiliate stations move to network-owned, direct-to-consumer services, resulting in a loss of exclusive programming and leverage in negotiating fair retransmission fees.

“Because the commission’s retransmission consent rules do not currently apply to vMVPDs, the Big Four networks control negotiations with virtual MVPDs,” the affiliate association chairs told Commissioner Nathan Simington and other officials in April, according to a filing. “The affiliated stations are at the mercy of agreements that they have no say in negotiating.“

Retransmission consent is by no means a new issue, but from the industry perspective, an urgent and evolving one given the explosion of streaming technology as an alternative to traditional cable.

“Today, some 15-20% of live television viewers subscribe to vMVPDs, and that number is expected to rise to more than 30% within the next several years,” affiliates told the FCC. “The shift has been driven in large part by the decision by vMVPDs to mimic traditional MVPDs by delivering live, linear multichannel programming to their subscribers. However, vMVPDs are not subject to the retransmission consent rules.”

In 2014, former Democratic FCC chair Tom Wheeler proposed a rulemaking action that would classify vMVPDs as MVPDs for retransmission consent purposes and asked for comments on treating certain OTT providers as MVPDs, but the measure failed to gain traction. It was neither the first nor the last time the FCC would raise the contentious issue that network affiliates are now asking the agency to reexamine.

In 2012, Sky Angel, an operator of Christian TV networks, asked the FCC (then under Wheeler’s leadership) to intervene in a programming dispute with Discover Networks. The FCC Media Bureau determined that the definition of a “channel” in FCC rules necessarily includes a physical “transmission path,” not merely a stream of video programming. Because Sky Angel did not provide its subscribers with a transmission path—the transmission path being provided, rather, by the subscriber’s Internet service provider—the Media Bureau found that Sky Angel did not qualify as an MVPD and did not have legal standing to pursue a program access complaint.

In 2019, under former FCC chair Ajit Pai, Charter Communications successfully filed an Effective Competition Petition in Massachusetts and Hawaii, reopening the issue of which regulatory regime to apply to OTT. Charter Communications argued that AT&T Now, an all-digital over-the-top (OTT) service, was a competitive MVPD, constituting the type of “effective competition” that would free Charter Communications from basic cable rate regulation in areas where AT&T Now was also available. Chairman Pai and the Republican commissioners agreed with them in part, “finding that Charter is subject to effective competition from the AT&T TV NOW video streaming service in certain franchise areas in Hawaii and Massachusetts where Charter is currently subject to rate regulation.” The FCC agreed with the competitive factor but stopped short of calling AT&T Now an MVPD, declining to apply all MVPD regulations to OTT services.

In 2021, the FCC initiated an inquiry for a report to Congress on whether streaming platforms should be required to fulfill the same emergency alert system (EAS) requirements as broadcasters. This measure was strongly opposed by streaming platforms, and the National Association of Broadcasters (NAB) emphasized the infeasibility of requiring streaming services to independently meet EAS requirements. However, network affiliates suggested that a ready solution exists by mandating that streaming platforms carry broadcast stations that already fulfill the EAS requirements.

“[T]he Four Affiliates Associations urge the Commission to note in its forthcoming report to Congress that Internet-based streaming services can and should be required to carry local broadcast signals in every market, to ensure that EAS information and other emergency warnings reach all viewers in every market across the country,” the associations said.The NAB took no position on whether to require streaming services to carry local TV signals, while companies behind the streaming services held that the burden on streamers would outweigh the benefit to viewers.

NRB monitors this issue for its impacts on Christian broadcasters in line with our historic mission of maintaining access for Christian communicators. YouTube TV, YouTube’s live TV service, has developed technology to carry local television channels in the market where the user is logged in. According to NRB’s research, however, not one local Christian broadcaster was included in the YouTube lineup for its market.

“Digital distribution platforms should play by the same rules as traditional cable and telecommunications platforms,” said NRB CEO Troy A. Miller. “Without the MVPD rules, Big Tech digital distribution platforms never carry local independent broadcasters out of the kindness of their hearts. Christian station owners don’t have the funds to buy onto every OTT platform. Congress saw the need to level the playing field in 1965 when must-carry rules were first established. The FCC fought several legal challenges in the Supreme Court to keep them in place. I urge the FCC to take up this battle once again.”

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