A recent policy paper from the International Center for Law & Economics suggests that the Federal Communications Commission (FCC) needs to consider revisions to retransmission consent rules alongside any adjustments to broadcast ownership limits. The organization, known for its conservative-leaning research, argues that the FCC’s ongoing review of ownership regulations only addresses a fraction of a larger, interconnected regulatory landscape.
According to the authors, ownership caps, retransmission consent requirements, and must-carry provisions are all intertwined. These factors influence the negotiation dynamics between broadcasters and distributors. “The broadcast-television market is an unusual case in which the prevailing regulatory distortions are directly interrelated, operate on the same products and players, and fall under the same agency’s control,” the paper states.
Current television broadcast ownership rules restrict any single entity from owning stations that reach more than 39% of U.S. television households, a cap established by Congress in 2004. The FCC’s notice of proposed rulemaking (NPRM) seeks comments on whether to retain, modify, or eliminate various broadcast ownership regulations but does not propose specific changes.
Eric Fruits, Geoffrey A. Manne, and Kristian Stout, the authors of the International Center for Law & Economics paper, highlight that streaming services do not face similar national reach limitations. They argue that local broadcasters must compete with digital platforms for audiences and advertising revenue, all while adhering to ownership caps established when broadcasters were considered the dominant media players.
The 1992 Cable Act allows broadcasters to choose between must-carry status, which guarantees free carriage by cable and satellite providers, and retransmission consent, which necessitates negotiations for carriage rights. These negotiations often result in fee payments to broadcasters. The paper notes that these fees are becoming a significant source of revenue for many stations, essential for funding local news operations.
The paper cites research analyzing almost 400 retransmission agreements from 2011 to 2018, conducted by Eun-A Park, Rob Frieden, and Krishna Jayakar. The analysis found that larger MVPD customer bases correlated with more frequent and longer programming blackouts. Multi-station broadcaster groups with network affiliations were associated with more blackouts, although shorter in duration.
It's been noted that networks, including One America News Network and NewsMax, have voiced opposition to proposed broadcaster consolidation, fearing that larger broadcast groups could demand higher retransmission fees, potentially leading distributors to drop smaller networks from their lineups to cut costs.
The paper proposes eliminating the retransmission consent and must-carry framework, treating broadcasters like other content creators, relying on copyright law, and voluntary contracts. It also suggests incremental changes, such as strengthening good-faith negotiation requirements, limiting automatic fee increases when broadcasters acquire additional stations, and implementing arbitration mechanisms during high-value programming negotiations.
FCC Chairman Brendan Carr commented after the September vote that ownership rules must be updated due to competition from streaming platforms and social media. The paper points out that while the FCC’s authority to modify the 39% ownership cap is debatable, the FCC has clear authority under Title VI to enforce bargaining standards for retransmission consent negotiations.
The authors argue that the regulatory framework was initially designed to address cable providers’ control over programming. They cite a 2009 U.S. Court of Appeals for the D.C. Circuit opinion in *Comcast v. FCC*, which stated that cable operators “no longer have the bottleneck power over programming that concerned the Congress in 1992.”
The paper details how economic pressures affect local television stations differently depending on their market position. For instance, WOOD in Grand Rapids, Michigan, operated by Nexstar Media Group, has reduced syndicated programming and increased local news blocks. Conversely, WNWO in Toledo, Ohio, a Sinclair Broadcast Group station, discontinued local news in 2023 and now airs programming from Sinclair’s “The National Desk.”
The authors conclude that addressing ownership restrictions without considering retransmission consent rules could have unintended consequences within the regulatory system.