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House Panel Advances STELA Reauthorization with Retransmission Consent Reform and Integration Ban Repeal Provisions




by:
Seth A. Davidson
Arthur H. Harding
Ari Z. Moskowitz
Edwards Wildman Palmer LLP - Washington Office

 
May 23, 2014

Previously published on May 13, 2014

On Thursday, May 8, 2014, the House Energy and Commerce Committee approved the “STELA Reauthorization Act of 2014” - legislation that would extend certain expiring Communications Act provisions relating to retransmission consent, including the requirement that retransmission consent negotiations be conducted in good faith. The bill also would amend the Communications Act to prohibit television stations in the same market from engaging in coordinated or joint retransmission consent negotiations; delay the application of the FCC’s new rules concerning “joint sales agreements” in certain circumstances; repeal both the rule barring cable operators from deleting or repositioning local broadcast stations during a “sweeps” rating period and the ban on integrated set-top boxes; and require the GAO to update its 2011 report to Congress regarding the implications of phasing out the cable and satellite compulsory copyright licenses. In a separate, but related action taken the same day, the House Judiciary Committee, which has concurrent jurisdiction over STELA, held a hearing on whether the Copyright Act provisions of the law (which grant a compulsory license to DBS operators to carry distant signals) should be allowed to sunset, with testimony by ACA, Dish, NAB, and the Copyright Office.

These two actions, described more fully below, are significant steps in the legislative process, but there are still several obstacles in Congress’ path. While some legislation dealing with STELA likely will be enacted before year’s end, whether the final version of that legislation will deal with such issues as joint retransmission consent negotiations, the sweeps rule, the integrated set-top ban, etc. is yet to be determined.

The Energy and Commerce Mark-up. The Satellite Television Extension and Localism Act of 2010 (“STELA”) contains a number of Copyright Act and Communications Act provisions that are scheduled to expire at the end of this year. On March 25, 2014, the Subcommittee on Communications and Technology of the House Energy and Commerce Committee approved a draft bill that focused on the Communications Act provisions in STELA and on other related Communications Act issues. See Edwards Wildman Client Advisory: Pace Picks Up on Congressional Consideration of Legislation Impacting Broadcast, Cable, and Satellite Industries, March 2014. At the time, there was some disagreement within the Subcommittee on a few of the bill’s provisions and it was agreed that members of the Subcommittee would continue to work to resolve their differences on a bipartisan basis.

The version of the legislation approved by the full Energy and Commerce Committee at its “mark-up” on May 8, 2014 reflects the sought-after compromise, as follows:

  • Restriction on joint retransmission consent negotiations. In response to concerns raised by the cable and satellite industries, the ban on joint retransmission consent negotiations was modified to (1) expressly bar a station from “coordinating negotiations” with another station in the same DMA and (2) to eliminate the exception for joint negotiations conducted with the assent of the MVPD. The bill also tightened up the exception for commonly owned stations so that it applies only if the stations are under direct or indirect “de jure” common ownership, a standard that the FCC applies only where there is more than 50 percent ownership (not simply an attributable interest).

  • Application of JSA attribution rule. In place of the provision barring the FCC from adopting new rules treating a joint sales agreement as an attributable ownership interest, the Committee, in a nod to the fact that the FCC has now adopted such a rule, simply provides that where a station seeks a waiver of the revised attribution rule, the station will not be treated as violating the ownership cap until the later of 18 months after the FCC denies such petition, or December 31, 2016.

The remaining provisions of the bill approved by the full Committee are essentially identical to the provisions approved in March: the expiring provisions requiring that retransmission consent negotiations be conducted in good faith and banning exclusive retransmission consent agreements are extended for five years; the set-top box integration ban and the prohibition on the deletion or repositioning of local stations during sweeps are repealed; GAO is directed to update the report it prepared pursuant to STELA on the Communications Act implications if Congress revises or phases-out the cable and satellite compulsory licenses; and the satellite industry is directed to submit an annual report to the FCC identifying the local markets where it retransmits local signals and changes in such carriage.

The House Judiciary Committee Hearing. The compulsory copyright license that allows DBS operators to retransmit distant signals was reauthorized by STELA in 2010 and will expire at the end of the year unless extended. Because the compulsory license is part of the Copyright Act, it falls within the jurisdiction of the House Judiciary Committee’s Subcommittee on Intellectual Property. On May 8, the Subcommittee heard testimony on the extension of the DBS distant signal from ACA, Dish, NAB, and the Copyright Office. Other parties, including the Writers’ Guild and IBEW were unable to testify in person but submitted written statements to the Subcommittee.

Although the immediate issue facing the Subcommittee is whether or not to extend the DBS compulsory license, the witnesses and Subcommittee members focused on a number of related issues, including whether the local and distant compulsory license applicable to cable, and the DBS local compulsory license, which are not scheduled to expire, should be repealed or phased out. Moreover, there was considerable discussion as to whether legislation addressing the expiring provisions of STELA should deal with retransmission consent (a Communications Act issue not directly in the Subcommittee’s jurisdiction). The views of the parties on these issues were as might be expected:

  • ACA and Dish not only supported retention of both the distant and local signal compulsory licenses, but also changes in retransmission consent. Dish in particular testified that Congress should either (1) provide a mechanism for retransmission consent impasses to be resolved by “baseball style” arbitration with interim carriage or (2) remove obstacles that prevent cable systems and satellite carriers from importing distant signals to replace a blacked out local signal.

  • NAB, as it has in the past, urged the Subcommittee to take a “hard look” at whether and to what extent the compulsory licenses continued to be necessary. NAB stated that if Congress was inclined to retain the licenses, it should adopt a “clean” extension of STELA that made no other substantive changes in either the Copyright Act or the Communications Act. With respect to proposals to include provisions relating to retransmission consent in the STELA reauthorization, NAB stated that it preferred no bill to a harmful bill.

  • The Copyright Office, reiterating the conclusions it reached in a 2010 report required by STELA, suggested that Congress should consider phasing out the compulsory licenses, starting with the distant signal licenses. The Office did not recommend a firm date for the phase out and acknowledged that there was some risk of disruption to consumers in such an approach. As a means of reducing that risk, the Office proposed that Congress adopt a “trigger” mechanism under which the distant signal license would become unavailable on a station-by-station basis upon the station’s demonstration that it had obtained the necessary rights from its program suppliers to “sublicense” their content for cable and satellite distribution.

Several of the members of the Subcommittee seemed open to phasing out the compulsory licenses (at least in part). Interest also was expressed in finding a solution to retransmission consent-related blackouts. A number of members of the Subcommittee indicated that they had issues in their districts with the inability of constituents to receive “in-state” programming because the stations designated as “local’ under the rules were licensed to a nearby, but out-of-state community. Dish was criticized by some members (and by NAB’s witness) for not entering into agreements with a neighboring in-state station to carry its news and weather programming (while not carrying the national network programming from that station). Dish pointed out the inefficiency of devoting a channel to carrying only a few hours of local programming and noted that if a local emergency arose during network programming hours, viewers would be unlikely to learn about it because they would be watching the out-of-state (but in-DMA) network affiliate during those hours.

Implications and Forecast. The approval of the STELA Reauthorization Act by the House Energy and Commerce Committee clears the way for that bill to be considered by the full House. However, because STELA also falls under the jurisdiction of the House Judiciary Committee, it is highly unlikely that the Energy and Commerce bill will be taken up until after the House Judiciary considers its own version of STELA Reauthorization and the two Committees work out an agreement on a consolidated approach. It is not clear how quickly the Judiciary Committee will move to consider specific legislative language. In addition, in the Senate, neither the Commerce Committee nor the Judiciary Committee has begun considering specific STELA reauthorization language. Typically, Congress waits until the last minute before agreeing to legislation extending the expiring compulsory license and retransmission consent-related provisions of the Communications and Copyright Acts and it would surprise no one if that is the case again in 2014.

As for the substance of the legislation, the fact that the House Energy and Commerce Committee has reached a bi-partisan consensus in support of legislation that not only extends the expiring good faith negotiation provision for five years, but also makes a number of other changes to the Communications Act generally, is good news for the cable and satellite industries, which support efforts to ban joint and coordinated negotiations and to repeal the current law’s sweeps week and integrated set-top box provisions. However, as the Judiciary Committee hearing revealed, there are stark differences between the stakeholders on a variety of issues, including phasing out the compulsory licenses and making further changes to the retransmission consent regime. Moreover, TiVo has been very critical of the provision repealing the integration ban. These disagreements increase the chances that Congress will settle for a “clean” bill - one that simply extends the expiring provisions of STELA. Thus, it will be important to closely watch what happens as the process unwinds to see what other changes to the Communications Act and Copyright Act are proposed and/or which, if any, of the provisions of the House Energy and Commerce Committee bill survive.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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Seth A. Davidson
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Ari Z. Moskowitz
 
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