September 22, 2015 - 9:54 am
By Bill Lake | Chief, Media Bureau

Last month, Chairman Wheeler circulated an order that would eliminate the Commission’s network non-duplication and syndicated exclusivity rules.  As Chairman Wheeler explained, these 50-year old rules are past their prime in light of the significant statutory and marketplace changes that have occurred since their adoption.  Given these changes, it’s time for the Commission to end its intrusion into this aspect of the commercial marketplace and leave it to TV networks, syndicators, and broadcast stations to implement the exclusive distribution rights that they choose to create.

Some have objected to our proposed action on the ground that the exclusivity rules are inextricably linked to the compulsory copyright licenses enacted by Congress for cable and satellite operators.  These advocates argue that, as a result, the Commission should keep its exclusivity rules unless and until Congress repeals the compulsory copyright licenses.  Otherwise, the argument goes, the cable and satellite operators will be given a free ride to retransmit copyrighted material without paying for it and in disregard of exclusive rights that broadcasters have bargained for.

The asserted inextricable link does not exist -- nor does the imagined free ride.  These advocates ignore major pieces of the intervening history – notably the creation of the retransmission consent regime in the 1992 Cable Act.

The historical backdrop for the exclusivity rules helps to explain why they are unneeded today.  The Commission adopted network non-duplication rules for cable in 1965.  Seven years later, the Commission adopted syndicated exclusivity rules for cable, consistent with a 1971 Consensus Agreement negotiated among the cable, broadcast, and program production industries to facilitate the growth and development of cable television service.  The parties to the Consensus Agreement agreed to support syndicated exclusivity rules for cable, as well as copyright legislation that would for the first time subject cable retransmission of broadcast television programs to full copyright liability but also include a compulsory copyright license for cable.  Congress amended the Copyright Act in 1976 to create a compulsory copyright license for cable.  The compulsory license permits cable systems to retransmit the signals of broadcast stations without having to negotiate separate copyright licenses with every owner of content carried on the stations’ signals, where carriage of the stations complies with FCC rules.  The exclusivity rules and a more limited compulsory copyright license were later extended to satellite operators.

When the network non-duplication and syndicated exclusivity rules for cable were adopted in 1965 and 1972, and when the cable compulsory license was later created, the Communications Act did not require cable operators to get a broadcast station’s consent to carry its signal, either locally or in a distant market in which another broadcaster had obtained exclusive distribution rights for the same programming.  Thus, the exclusivity rules were viewed as necessary to prevent a cable operator from importing an out-of-market station carrying duplicative programming.  That situation changed dramatically with passage of the 1992 Cable Act.  That law for the first time forbade cable operators from retransmitting the signals of a broadcast station without its consent. 

Today, the Communications Act forbids all MVPDs – cable and satellite alike – from retransmitting the signal of a broadcast station without the broadcaster’s permission.

Under our current retransmission consent regime, adistant station must give its consent before its signal may be imported into another station’s local market.  And, in practice, network affiliation and syndication agreements typically prohibit broadcast stations from granting MVPDs retransmission consent for out-of-market carriage of their signals.  Networks, syndicators, and broadcast stations that choose to create exclusive distribution rights may effectively safeguard those rights through privately negotiated affiliation and syndication agreements.  They will continue to have this right in the absence of our exclusivity rules.  It is thus wrong to suggest that, in the absence of the exclusivity rules, the compulsory copyright licenses would allow MVPDs “to abrogate exclusive licenses negotiated by broadcasters in the marketplace.”

Nor would MVPDs get a free ride to carry copyrighted material without paying.  MVPDs today pay fees to broadcasters for the right to retransmit their signals, and when networks, syndicators, or content creators license their content to broadcast stations they understand that the content carried on the broadcast signal will be retransmitted by MVPDs, consistent with the agreed-on territorial restrictions.  The transactions necessarily reflect that understanding.  The fact that an MVPD pays to retransmit the “signal” of a station does not hide the fact that the payment is the key that unlocks the right to retransmit the content carried on the signal and that the content providers have been paid for inclusion of their programming.

Is it time to reconsider the compulsory licenses for cable and satellite?  The main rationale for their adoption was that it would be too cumbersome for MVPDs to negotiate separately to license all the varied programming carried on a broadcast signal.  The later success of cable channels in acting as “rights aggregators” to obtain the necessary rights to provide the programming they assemble to MVPDs may justify a fresh look at that rationale.  But the compulsory licenses, and the rationale on which they are based, provide no reason to retain the exclusivity rules, as geographic exclusivity can be well protected by contract, with the backup of the retransmission consent regime. 

There was a time and a place for the Commission’s exclusivity rules.  That time has passed.  It is now time for the Commission to step aside and let programming negotiators in the private marketplace do their jobs.  Networks, syndicators, and broadcast stations today decide what exclusivity provisions to include in their affiliation and syndication agreements – and they will be free to do so in the absence of our rules.  They will have multiple means of enforcing those provisions without the additional device of an exclusivity complaint to the Commission, which has scarcely ever been filed.  They may choose to include provisions in their agreements geared to facilitating enforcement, such as provisions for private arbitration, fee shifting, choice of law, and third-party beneficiary rights.  And in the end any station will know that a network or syndicator does not have to continue to deal with a station that grants retransmission rights beyond the scope permitted by its affiliation or syndication agreement.