On Wednesday, the FCC took steps to implement two key provisions of the 2014 Satellite Television Extension and Localism Act Reauthorization Act (STELARA). In an order approved unanimously with a partial dissent by FCC Commissioner Michael O’Rielly, the FCC modified its rules to extend to direct broadcast satellite (DBS) providers the same rights held by broadcasters and cable operators to request modification of local TV broadcast markets. At the same time, the FCC issued a Notice of Proposed Rulemaking (NPRM) which requests public feedback on what changes the FCC should make to its “totality of circumstances” (TOC) test for determining whether retransmission consent negotiations among broadcasters and multichannel video program distributors are being conducted in “good faith.”

The market modification order fulfills the requirements of STELARA Section 102, which directs the FCC to consider market modification requests filed by DBS operators in accordance with five factors. Those include whether the requested modification will provide DBS viewers with access to TV stations “that are located in the same state as the community considered for modification.” Observing that some DBS subscribers living in out-of-state counties within a designated market area are left without access to in-state broadcast TV stations, the FCC proclaimed that the new rules would combat this “orphan county” phenomenon by “allowing the Commission to modify, upon the request of a television station, satellite operator, or county government, a particular commercial television broadcast station’s local television market to add or delete communities to better reflect market realities.”

Under the amended rules, local governments and local franchise authorities (LFAs) will be deemed as “interested parties” that must be served with copies of market modification petitions that could impact their communities. The rules also include exceptions where it may not be technically feasible for a DBS operator to modify local market coverage. While supporting the ruling as one that “will bring welcome and long-awaited relief” to DBS subscribers in orphan counties, Commissioner O’Rielly protested the decision of his colleagues to define local governments and LFAs as interested parties. Asserting that, “unlike in the cable context, local governments and [LFAs] currently have no role in satellite regulation,” O’Reilly said, “I see no reason for the Commission to involve them now.”

Meanwhile, in soliciting comment on the TOC standard, the NPRM points to significant changes that have impacted the retransmission consent marketplace since the good faith requirement was enacted. The NPRM also highlights language in the Senate Commerce Committee legislative report on STELARA suggesting that negotiating parties “may be engaging in tactics that push these negotiations toward a breakdown and result in consumer harm.” As part of its good faith analysis, the FCC assesses retransmission negotiation practices under TOC criteria that are not included in the nine “per se” violations of the good faith test but may otherwise provide evidence of failure to negotiate in good faith. Specifically, the NPRM requests comment on what practices, if any, the FCC should identify “as evidencing bad faith under the [TOC] test.”

Practices identified by parties in other FCC proceedings, such as the blockage of consumer access to online broadcast programming during retransmission consent disputes, and broadcasters’ “insistence on bundling broadcast stations with other broadcast stations or cable networks” into retransmission consent agreements, will also be reviewed within the context of the TOC standard. Emphasizing that the goal of the NPRM “is to provide further guidance to negotiating parties,” the FCC voiced hope that its actions will “benefit consumers of video programming service by facilitating successful negotiations and avoiding disruptions in service.”