In advance of today’s hearing on “Innovation Versus Regulation in the Video Marketplace,” two members of the House Energy and Commerce Committee’s Communications and Technology Subcommittee have floated drafts of legislation to amend the Communications Act. First, ranking member Anna Eshoo (D-CA) released a “discussion draft” of a retransmission consent reform bill entitled the “Video CHOICE (Consumers Have Options in Choosing Entertainment) Act. Second, Subcommittee Vice Chairman Bob Latta (R-OH) circulated a bill that would repeal the FCC’s ban on the deployment of integrated set-top boxes. Both bills likely will be the subject of discussion at today’s hearing.

Rep. Eshoo’s Discussion Draft

According to Representative Eshoo, her proposed legislation is intended, among other things, to reduce the likelihood of retransmission consent-related service disruptions. In a statement released along with the draft, Ms. Eshoo stated that:

“A vibrant video marketplace is one in which there is healthy competition, consumer choice and basic protections to ensure consumers aren't caught in the middle of a dispute they have no control over. Recurring TV blackouts, including the 91 U.S. markets impacted in 2012, have made it abundantly clear that the FCC needs explicit statutory authority to intervene when retransmission disputes break down.”

Representative Eshoo’s bill contains five principal provisions:

  1. Interim Carriage During Retransmission Consent Impasses. The bill would amend the retransmission consent provisions of the Communications Act to provide that if a retransmission consent agreement between a broadcaster and multichannel video programmer distributor (MVPD) expires and the FCC determines that the parties have reached an impasse in negotiating a new agreement, the FCC may authorize interim carriage of the station by the MVPD “pending the conclusion of a new agreement.”  
  2. Prohibition of Agreements Conditioned on Carriage of Affiliated Programming. Another amendment to the Act’s retransmission consent provisions would provide that a television station may not enter into a retransmission consent agreement with an MVPD that is “directly or indirectly conditioned” on the MVPD agreeing to carry any other programming that is affiliated with the station. This amendment would apply only to retransmission consent agreements entered into after the bill becomes law.
  3. Rulemaking on Blocking of Online Content During Negotiations. The FCC is given six months to complete a rulemaking proceeding to determine whether a broadcast station violates its obligation to negotiate in good faith when, during retransmission consent negotiations, it blocks online content owned by or affiliated with the station.
  4. Cable Service Tiers. The bill proposes several revisions to the “must buy” and “buy through” provisions of the rate regulation section of the 1992 Cable Act in order to make it possible for consumers to purchase cable television service without having to subscribe to stations electing retransmission consent. Specifically,
  • the must buy “basic tier” would be redefined to consist only of must carry broadcast signals and PEG channels;
  • cable operators would be required to offer subscribers a separately available “retransmission consent tier” consisting only of the signals of stations carried pursuant to a retransmission consent agreement;
  • rate regulation would apply to both the must buy “basic tier” and the optional “retransmission consent tier” in situations where the cable system is not subject to effective competition;
  • cable operators would be prohibited from requiring subscribers to purchase any tier other than the must buy basic service tier as a condition of access to the retransmission consent tier or services offered on a per channel or per program basis; and
  • cable operators also would be prohibited from charging subscribers who only take the basic tier more for the retransmission consent tier or a per channel or per program service than is charged to subscribers who take any other tier.
  1. FCC Study of Sports Programming Costs. The FCC is required to prepare an annual report to Congress on the costs paid by MVPDs for the carriage of regional and national television sports networks in the top 20 regional sports markets as determined by the FCC.

Analysis. Initial reaction by the cable and satellite industries to the Video CHOICE bill was generally positive. For example, ACA applauded Rep. Eshoo for “having the vision and courage to offer a timely and thoughtful plan for addressing serious problems causing harm to consumers related to the broken retransmission consent and sports programming markets.” On the other hand, the Gordon Smith, president of the National Association of Broadcasters stated that the broadcasting industry strongly opposes Representative Eshoo’s proposed legislation, expressing surprise at “the pro-pay TV slant” of the bill.

As is typically the case with legislation released as a “discussion draft,” if and when the legislation is formally introduced, it could differ in significant respects from the original version. Indeed, the American Television Alliance (a coalition that supports retransmission consent reform) described the bill as a “step in the right direction” and indicated that it looked forward to working with Eshoo and other members seeking to update the video rules.

In particular, observers have noted several issues that likely will be raised with respect to the bill, including whether the FCC should be given the latitude to determine when an impasse has occurred in a retransmission consent negotiation; whether there should be a time limit on the period of interim carriage and whether there should be a mechanism in the legislation to facilitate resolution of negotiating impasses; whether Congress should declare that blocking of online content is a violation of the good faith rules (rather than have the FCC decide whether it is). It also is possible that changes will be made to clarify whether and to what extent the retransmission consent tier provisions apply to other MVPDs, including DBS and to clarify whether a subscriber can be required to purchase the retransmission consent tier as a condition of purchasing any other non-basic tier.

Representative Latta’s Draft Bill

In 1996, Congress amended the Communications Act to direct the FCC to take steps to establish a retail marketplace for navigation devices. The FCC’s implementation of this directive included the adoption of a rule prohibiting cable operators from deploying navigation devices that perform both conditional access and other functions in a single integrated piece of equipment. Last June, Amy Tykeson, President of BendBroadband, reviewed the history of this rule in testimony delivered to the Technology and Communications Subcommittee. Ms. Tykeson cited a variety of marketplace developments that had rendered the FCC’s rule, which had cost cable operators an estimated one billion dollars, unnecessary. Ms. Tykeson argued that the time has come for Congress to eliminate the rule.

Mr. Latta’s proposed bill carries out Ms. Tykeson’s recommendation by amending Section 629 of the Communications Act to deny the FCC the authority to adopt any rule or policy that would prohibit MVPDs from deploying navigation devices that perform both conditional access and other functions in a single integrated piece of equipment and by declaring that the FCC’s existing integrated set-top box ban would no longer be effective.

Analysis. There was no immediate reaction to the Latta bill. However, it is certain that the bill will be praised by the cable industry and criticized by the Consumer Electronics Association.