On May 9, 2013, Senator John McCain (R-AZ) introduced the “Television Consumer Freedom Act of 2013.” The bill seeks to remove barriers to, and create incentives for wholesale and retail unbundling of broadcast stations and other channels of video programming. The bill also contains provisions that would address threats by some broadcast networks to downgrade the content of their over-the-air signals in response to judicial decisions upholding Aereo’s on-line antenna/DVR service and would restrict sports teams from ordering cable operators and satellite carriers to blackout certain sports events when they take place in publicly-financed venues.

The introduction of Sen. McCain’s bill drew a mixed reaction; it was saluted as a positive step forward by the American Cable Association and public interest groups, but was criticized as unnecessary by the National Cable & Telecommunications Association. The bill’s prospects for passage are not considered great, but proponents of video reform (including retransmission consent reform) suggested that the mere fact that the bill was introduced is an important acknowledgment of the need for changes in the current laws governing the wholesale and retail distribution of video programming.

Briefly summarized, the bill provides as follows:

A La Carte Provisions

First, the bill would eliminate any regulatory barriers that might impede distributors and programmers from agreeing to make programming available to consumers on an a la carte basis. For example, the bill amends the requirement that broadcast stations that are carried pursuant to a retransmission consent agreement must be included on a cable system’s “basic service tier” that a subscriber must purchase before he or she can purchase any other programming. The bill also modifies the must carry provisions of the Cable Act to clarify that stations carried pursuant to retransmission consent do not have to be included on the system’s basic tier.

Second, the bill seeks to create a wholesale and retail a la carte programming marketplace by threatening to withhold certain government-created benefits where one side or the other does not unbundle the programming that it sells or carries. More specifically, the bill --

provides that the carriage of broadcast stations electing retransmission consent will be covered by the cable or satellite compulsory license only if the cable operator or satellite carriers offers subscribers the opportunity to purchase such broadcast stations (and any co-owned non-broadcast channels) on an a la carte basis;

provides that a broadcaster can only avail itself of retransmission consent, network nonduplication, and syndicated exclusivity rights if it makes its retransmission consent stations (and any co-owned non-broadcast programming networks) available for distributors to purchase (i.e., wholesale) and sell (i.e., retail) on an unbundled basis;

provides that programmers that do not own broadcast stations may engage in the wholesale bundling of their channels only if the programmer also offers distributors the opportunity to purchase those channels on an unbundled, a la carte basis; and

provides that, in the event a distributor and programmer cannot reach an agreement on the terms of an agreement allowing subscribers to purchase the programmer’s channels on an a la carte basis, the parties must disclose to the FCC the terms of the parties’ most recent offers.

Preventing Evasion of the Aereo Decision

Last month, the United States Court of Appeals for the Second Circuit allowed Aereo to continue to offer its on-line antenna/DVR service without having to obtain a copyright license from the owners of the programming being delivered to consumers. In response, some broadcast executives have publicly suggested that they might consider downgrading the content of their over-the-air signals or otherwise adopt strategies that would make over-the-air content less attractive than the version of their stations received from a cable or satellite carrier. In order to prevent such maneuvers, the bill proposes that a broadcaster will forfeit its spectrum if it does not provide the same content (except for commercials) on its over-the-air transmissions as it provides through MVPDs.

Limiting Sports Blackouts

Under the FCC’s rules, sports teams may demand that cable and satellite distributors black out distant signals when they carry “home” sporting events that are not being broadcast locally. Sen. McCain is proposing to limit those rules so that they do not apply when the event in question takes place in a taxpayer-subsidized venue.