Sen. John Kerry moving fast on negotiation impasse remedy


Most politicians in the service area are frustrated by the ongoing retransmission dispute between Cablevision and Fox, but one who does not represent anybody in the immediate vicinity is already taking action. Sen. John Kerry (D-MA) already has a draft for legislation to govern the retransmission negotiation process, and is looking to make it part of the lame duck schedule of the 111th Congress.

Kerry’s bill would prevent programmers from pulling their offerings during the negotiation process, even if existing contracts have expired, and would throw arbitration into the mix as an option.

Kerry fired off a letter to FCC Chairman Julius Genachowski enlisting his support for legislation. “I hope you will agree that the current process – which forces all sides and particularly consumers into lousy choices – is broken and in need of reform,” he wrote. “Currently, either party, sufficiently strong willed, can play a game of negotiating chicken with the consumer caught in the middle. It incentivizes conflict over negotiation.”

Kerry also pointed out that an existing FCC proceeding on the subject has been buried within the Commission without action. “The FCC has had sufficient time to consider the comments that have been filed on that petition and begin the process to revise its rules. But in the absence of FCC action, I feel a responsibility to begin to consider the smartest, least intrusive actions to reform the law.”

In what he is calling a “discussion draft,” Kerry mentioned four possible situations:

* Scenario 1 – The FCC finds that the broadcaster is negotiating in good faith and making an offer consistent with market conditions but the distributor is not. In this case, the distributor shall agree to the broadcaster’s last best offer or terminate carriage and the FCC may fine the distributor for negotiating in bad faith. In lieu of termination of the signal, the broadcaster can withdraw the last best offer and ask the Commission to require binding arbitration.

* Scenario 2 – The FCC finds that the broadcaster is not negotiating in good faith or making an offer consistent with market conditions and the distributor is negotiating in good faith and making an offer consistent with market conditions, then the FCC can require binding arbitration. The penalty for the broadcaster is forced participation in binding arbitration.

* Scenario 3 – This will be the most likely scenario in most cases. The FCC finds that both parties have negotiated in good faith but reached a true impasse based on an honest disagreement on the value of the signal. In this case, the FCC may request them to submit to binding arbitration. If one party or the other refuses to engage in binding arbitration, then the FCC will provide both parties with a model notice by which to inform consumers of the potential loss of service as well as the difference in offers on the table so that consumers can judge for themselves who was making the fairest offer. This adds a more consumer friendly and transparent way to end transmission of services if necessary and creates an attractive option for arbitration for both parties.

* Scenario 4 – The FCC finds that neither party is negotiating in good faith, then it can require binding arbitration and fine both parties.

Kerry concluded by inviting Genachowski to jump into the fray. “I look forward to working with you on a solution to this problem. If you have an alternative solution or believe you can make the process work for consumers using your regulatory authority, please let me know.”

RBR-TVBR observation: Good faith, bad faith – we can pretty much guarantee that in every contentious negotiation between two parties, there are two parties that feel they are negotiating in good faith, and two parties that feel their opponent is negotiating in bad faith. Anybody out there have children? Then you know what Kerry is asking when he suggests putting the government in the middle of these battles.

For the FCC to figure this stuff out, it will need facts – dollar amounts, ratings, revenues. There are intangibles, particularly in the case of broadcasters when it comes to the provision of local news and emergency service. These factors are complex and in some ways subtle, and they get further confused when things like bundling of basic channels is factored in. And let’s not forget the always-good-for-a-brawl must-have programming angle that always comes up when sports and special events programming is involved.

It would not necessarily be easy for an MVPD to provide this information period, much less in a hurry during the heat of a contentious carriage negotiation, which makes Kerry’s discussion draft wildly impractical from the get-go, in our humble opinion.

It’s true that most negotiations are handled relatively peacefully, but the worst battles are taking place in the biggest media market and just beg politicians to get involved.

Do MVPDs and broadcasters really want to put the striped referee suit on bureaucrats at the FCC, and risk bringing in outside arbitrators? Do they want to create an arbitrator-driven demand for carriage rights data that could lead directly to new enthusiasm for a government-mandated a la carte channel menu option?

Cablevision and Fox can continue their jousting match, but they should be aware that there is much more at stake than just this one contract.