FCC standstill order leaves Canadian independents hopeful

The U.S. Federal Communications Commission (FCC) issued new rules governing carriage disputes between broadcasters and cable and satellite distributors Monday, leaving Canadian independent broadcasters with the hope that the CRTC follows suit with a similar “standstill” policy. The FCC decision established procedures for a standstill “of the price, terms, and other conditions of an existing programming contract by a program carriage complainant seeking renewal of such a contract.” The decision is a significant one from the FCC, which, like the CRTC in Canada, is regulating a consolidated broadcast industry where the major broadcast distributors in the country also own major programming assets. The situation presents opportunities for carriers to discriminate against content they do not own. “he record reflects that, absent a standstill, an MVPD will have the ability to retaliate against a programming vendor that files a legitimate complaint by ceasing carriage of the programming vendor’s video programming, thereby harming the programming vendor as well as viewers who have come to expect to be able to view that video programming,” the FCC wrote. “Moreover, absent a standstill, programming vendors may feel compelled to agree to the carriage demands of , even if these demands violate the program carriage rules, in order to maintain carriage of video programming in which they have made substantial investments.” Canadian independent broadcasters are viewing the decision favourably. “It’s heartening to see the U.S. media regulator consistently coming to terms with the fallacy of a ‘free market’ in the broadcasting sector,” Bill Roberts, president and CEO of Zoomer Media’s television division, wrote in an email to The Wire Report. Roberts, who spoke on behalf of the Independent Broadcast Group at the CRTC’s vertical integration hearings in June, said there is greater concentration of ownership among broadcast distributors in Canada than in the U.S. “The Independent Broadcast Group (IBG) is hopeful that our CRTC will be equally diligent with regards to carriage, dispute resolution, and levelling the playing field as a result of the pending vertical integration hearing process,” he wrote. The FCC decision lays out the terms on which broadcasters can file carriage complaints with the regulator and the commission’s role and powers in resolving them quickly. The decision sets out the conditions under which a complaint can amount to a prima facie violation; gives the defendant 60 days to file an answer to the complaint; and forces the commission’s media bureau to release a decision within 60 days if it decides to proceed without discovery or within 150 days following a discovery period. Under the new standstill rules, a complainant must file a standstill request no later than 30 days before the existing contract expires. It must show how the complaint is likely to prevail and how it would “suffer irreparable harm” without a standstill on carriage, the FCC said. The complainant must also demonstrate that the standstill will not harm other parties and that it’s in the public interest. Several parties at the CRTC’s vertical integration hearings in June called for a standstill provision as a means to level the playing field when carriage disputes arise. The FCC decision also states that if the settled amount is different from the standstill’s conditions, the company must pay “an amount representing the difference between the amount actually paid under the terms of the expired contract during resolution of the complaint and the amount that is required to be paid pursuant to the decision.” The new carriage terms are applied to the point of the previous contract’s expiration—or the beginning of the standstill—so that there is no incentive for complainants to seek a standstill to benefit from the status quo, the FCC wrote. Martha Fusca, president and CEO of independent broadcaster and producer Stornoway Communications, also an IBG member, said the CRTC should take similar action but added the FCC decision doesn’t go far enough to serve the Canadian context. “In the U.S. you still have very powerful broadcasters,” she said in an interview. “You don’t in Canada. What happened to the powerful broadcasters in this country? They’re no longer independent. You don’t have CTV, you don’t have Global . Those were the powerful Canadian broadcasters.” BCE Inc.’s purchase of CTV and Shaw Communications Inc.’s acquisition of Global last year prompted the CRTC to call its hearing examining vertical integration. Fusca said standstills are necessary in Canada because of the disparity in market power between incumbents and independents. “You can do a lot of damage, especially to an independent Canadian broadcaster, over a very short period of time if there isn’t a standstill clause,” she said. Fusca said she hopes the CRTC is paying attention to how the Americans, who have a few years’ additional experience with vertical integration, are dealing with it. “I think should read with a good deal of care and it should be instructive because here they have a situation that very closely reflects the Canadian environment. In fact the Canadian environment is in much greater distress because of the sheer disparity in the market power in Canada,” she said. Several groups, including one vertically integrated company, came out in favour of a standstill provision at the CRTC’s hearings. Cable distributors Eastlink, Cogeco Cable Inc. and the Canadian Cable Systems Alliance Inc. all called for standstills for dispute resolutions, as did independent broadcaster Astral Media Inc. Telus Corp. said withholding signals during a dispute should be prohibited and Rogers Communications Inc. supported an “enhanced standstill mechanism.” “This would require a rights holder to make its content available for distribution on all competing distributors’ ancillary platforms during a dispute and would prohibit any change to pre-dispute terms and conditions until after the dispute has been resolved,” Ken Engelhart, Rogers’ senior vice-president for regulatory affairs, said at the hearing. Shaw opposed the standstill and Bell said it was opposed to any additional regulation. Following the hearing, the CRTC instituted a temporary standstill policy for carriage disputes until 30 days after it releases its decision on vertical integration, expected this fall. The ruling did not preclude both sides from negotiating and reaching new agreements. In a separate opinion issued Monday in support of the FCC decision, FCC commissioner Michael Copps said he was pleased that the new rules would improve and clarify the program complaint procedure and prevent retaliation from distributors who face complaints. “Video distributors are now more likely to be producers themselves, often with far greater leverage and new incentives to favor their own content over that of independent producers,” he wrote. “Modernizing these rules is essential to ensure that consumers have the ability to view a variety of diverse programming at the lowest possible cost and hopefully to foster more independent production.” Commissioner Robert McDowell dissented from the standstill portion of the decision, saying the policy would benefit from further debate. McDowell wrote that the issue of a standstill was not raised before parties submitted their initial comments, which denied some of them the opportunity to “opine.” He wrote that the relationship between retaliation and standstill arrangements was “tenuous at best,” making the rule vulnerable to court remand. “A rule that extends a contractual arrangement and determines the amount of compensation parties will receive after the program carriage dispute is resolved is outside the scope of Commission procedure,” McDowell wrote. Michael Powell, a former FCC chairman and now president and CEO of the National Cable and Telecommunications Association, issued a statement this week strongly opposing the decision. “The FCC’s program carriage decision represents an unfortunate trifecta: a flawed process that the FCC stubbornly refused to correct, substantive policy discussions that show little regard for the limits of agency authority or constitutional rights, and a disturbing lack of appreciation of the potential impact of government intervention on consumers or the marketplace,” he wrote, adding that he would “explore other avenues for redress.” Rogers and Bell declined to comment for this article, and Shaw could not be reached by deadline. mburgess@thewirereport.ca

FCC standstill order leaves Canadian independents hopeful

Broadcast | August 5, 2011

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