FEDERAL COMMUNICATIONS COMMISSION
WASHINGTON
OFFICE OF
THE CHAIRMAN
November 10,2015
The Honorable Charles E. Schumer
United States Senate
322 Hart Senate Office Building
Washington, D.C. 20510
Dear Senator Schumer:
Thank you for your recent correspondence regarding the proposal to change the network
non-duplication and syndication exclusivity rules. Your views will be entered into the record of
both our ongoing retransmission consent and exclusivity proceedings.
Congress instructed the Commission in the Satellite Television Extension and Localism
Act Reauthorization Act (STELAR) to open a proceeding to examine the "totality of
circumstances" involved in retransmission consent negotiations. The purpose of this proceeding,
which is ongoing at the Commission, is to examine both forces that act to drive up cable rates, as
well as the ability of consumers to fairly access video programming. An integral part of any
review ofthe retransmission consent regime is consideration of the Commission's exclusivity
rules.
As you are aware, consumers are often the victims of retransmission disputes. Frequent
press accounts have highlighted that the negotiations between broadcasters and cable operators
over retransmission rights often result in program blackouts where cable consumers are denied
the ability to see a particular channel until the dispute is resolved. The Commission's exclusivity
rules serve to exacerbate this problem for consumers by prohibiting the importation of distant
signals, as well as strengthen the position of broadcasters in retransmission disputes, thereby
constituting a distortion of free market processes.
In the early days of the cable industry, cable companies often supplemented their
programming with signals imported from distant broadcasters. Congress provided a compulsory
copyright license for the programming carried on the distant signals with an important condition:
that the signals and their constituent programming would only be covered by the compulsory
license if the importation of the distant signals were consistent with FCC rules. This statutory
provision, codified at 17 U.S.C. 111 and 119, is the reason that the FCC exclusivity rules have
any relevance today.
A great deal has changed since the compulsory copyright law was enacted. Two things
seem especially relevant: private contracts between and among programmers, networks, and
broadcasters typically include exclusivity provisions; and, in 1992, Congress passed
retransmission consent legislation giving broadcasters the right to negotiate with cable and DBS
companies over the right to transmit their signals.
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There are many who argue that retransmission fees drive up consumers' cable bills
without any corresponding benefit. Indeed, some broadcasters have told Wall Street they expect
continuing double digit increases in the retransmission fees they charge cable companies. These
fees, of course, are ultimately paid by consumers.
An elimination of the exclusivity rules is unlikely to have an immediate effect on
programmers, broadcasters, cable companies, or consumers. This is because, as noted, current
broadcast program contracts and network affiliation agreements normally contain their own
exclusivity provisions prohibiting a program from being imported into a market if it is being
shown on a local broadcast station. In these circumstances, retaining the exclusivity provisions
may well be redundant and a federal intrusion, without cause, into the marketplace.
Faith in the free market would suggest that government get out of the way, absent an
indication of harm. Since the rules appear redundant to existing contractual provisions based on
the record, their elimination would not be the trigger for such harm. However, the presence of
the exclusivity rules prohibits the market from operating in a fair and efficient manner and
aggravates the harm to consumers during retransmission consent disputes. Simply put, there is a
possibility that the exclusivity rules protect broadcasters from the marketplace by substituting an
anti-market government mandate and in the process contribute to high cable and DBS prices.
I appreciate your thoughtful input on this issue. I am sure it will continue to be discussed
as we pursue Congress's mandate on retransmission consent negotiations.;;;st:J-
Tom Wheeler