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ACA: FCC Should Deem Broadcasters’ Anticompetitive Practices Attributable Under Media Ownership Rules

Trade Group Says NAB Fails To Address Competitive Harm Arising From Coordinated Retransmission Consent Negotiations

PITTSBURGH, April 18, 2012 - The American Cable Association is urging the Federal Communications Commission to consider two separately owned TV stations from the same market as a single, commonly owned entity under the agency's ownership attribution rules if the two stations opt to coordinate their retransmission consent negotiations with multichannel video programming providers (MVPDs).

"ACA has put evidence in the record showing that scores of local TV stations are coordinating retransmission consent negotiations and the effect is to lessen competition in local broadcasting markets," ACA President and CEO Matthew M. Polka said. "To shield the public from harm arising from reductions in broadcast competition, the FCC should rule that separately owned TV stations in the same market will be considered a single entity if the stations coordinate their retransmission consent negotiations, effectively prohibiting combinations of top four rated stations that are directly forbidden under the existing local television duopoly rule."

In reply comments filed on Tuesday, ACA stressed the need and appropriateness for the FCC to address ACA's well-documented concerns about coordinated retransmission consent negotiations in connection with the FCC's ongoing quadrennial review of its media ownership rules and policies. Further, ACA noted that the FCC -- charged by law with promoting competition in local broadcast markets -- should not be distracted by broadcasters' perpetual claims that anticompetitive broadcast practices are a matter solely for the antitrust authorities, even though the stations are FCC licensees.

Given the importance of retransmission consent to broadcasters, now and in the future, the FCC must assess the impact of agreements to coordinate negotiations on local television competition through its traditional attribution analysis.  ACA noted that agreements by separately owned same-market stations to coordinate retransmission consent negotiations convey sufficient influence over core operations of a station with respect to finances and programming and therefore may be deemed attributable under the FCC's traditional attribution standard.

Notwithstanding the National Association of Broadcasters' effort to distract the FCC with red herring arguments, local television ownership rules were designed to promote competition in local television markets, and behavior that threatens to harm competition through covert consolidation of stations is an urgent matter for the FCC to resolve.  No credible case for delay in addressing collusive broadcaster practices has been presented in the record.

In its comments, ACA underscored that broadcaster assertions about the efficiencies derived from various forms of sharing agreements are totally beside the point.  ACA has never disputed that various forms of operational or resource-sharing agreements can be beneficial to broadcast stations.  ACA has raised no objections to other forms of resource sharing arrangements among separately owned stations, and takes no position on whether or not such sharing agreements should be attributable on a per se basis.  ACA's sole concern has been with the reduction in local competition through agreements to coordinate retransmission consent negotiations, which has de minimis efficiencies compared to the claimed efficiencies involving other forms of sharing arrangements.

ACA's comments detail the need for prompt action to expand the attribution rules in response market developments,  including the increasing importance industrywide of retransmission consent fees as a meaningful secondary source of revenue to local television stations; the increasing practice of separately owned same-market television stations coordinating retransmission consent negotiations; and the reduction in competition in designated market areas (DMAs) when separately owned same-market broadcasters coordinate their retransmission consent negotiations.

Today, non-commonly owned television stations in the same market are effectively operating as if commonly owned by agreeing to coordinate their negotiation of retransmission consent with MVPDs, ACA said.  The record shows that the practice directly lessens local television competition, evidenced by MVPDs who report paying higher retransmission consent fees to separately owned, same market stations than stations that negotiate separately.

ACA has placed extensive evidence in the record demonstrating the prevalence of coordinated retransmission consent negotiation by separately owned Big 4 network affiliates located within the same DMA. By engaging in this practice, broadcasters choose not to compete against one another for retransmission consent fees based on the quality of their programming to attract viewers, but instead to secure higher retransmission consent fees through collusion or price fixing.  Available empirical evidence demonstrates that when cable operators are forced to negotiate with a single representative for more than one Big 4 affiliate in the same market, the average retransmission consent fees paid are at least 22% higher than the average fees paid to station owners who negotiated separately.

In its comments, ACA confirmed 48 instances in 43 DMAs where separately owned, same market broadcasters have coordinated their retransmission consent negotiations. This evidence demonstrates that negotiating with a single representative for two separately owned stations in the same market is not an uncommon occurrence and is rapidly becoming as frequent as one-to-one negotiations between operators and stations.  FCC rules prohibit mergers among the four top-rated stations in a market, which is effectively a proxy for a ban on combinations among stations affiliated with ABC, CBS, NBC and FOX.

"Broadcasters have simply failed to articulate a single compelling reason why the FCC should decline to prohibit collusion among broadcasters in the sale of retransmission consent rights to MVPDs.  In our view, the time has come for the FCC to take decisive action to put an end to this anticompetitive practice and restore free market competition to affected markets," Polka said.

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.4 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/.

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