A new policy paper from the International Center for Law & Economics argues that the Federal Communications Commission (FCC) should evaluate modifications to retransmission consent rules in conjunction with any adjustments to broadcast ownership limitations. This conservative-leaning research organization suggests the FCC's ongoing review of ownership regulations, which began with a 3-0 vote in September, only addresses a portion of a more complex regulatory landscape.
According to the paper, ownership caps, retransmission consent requirements, and must-carry provisions are interconnected and influence the bargaining positions 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 asserts.
Currently, television broadcast ownership rules restrict any single entity from owning stations reaching more than 39% of U.S. television households, a cap established by Congress in 2004. The FCC’s September notice of proposed rulemaking (NPRM) doesn’t propose specific rule changes but seeks feedback on maintaining, modifying, or eliminating existing broadcast ownership regulations. Eric Fruits, Geoffrey A. Manne, and Kristian Stout, the authors of the International Center for Law & Economics paper, point out that streaming services do not face similar national reach restrictions.
The authors observe that local broadcasters are now competing with digital platforms for audiences and advertising revenue, all while operating under ownership caps designed when broadcasters were considered the dominant media force. The 1992 Cable Act allows broadcasters to choose between must-carry status, guaranteeing free carriage by cable and satellite providers, and retransmission consent, which necessitates multichannel video programming distributors to negotiate carriage rights every three years. These negotiations often lead to fee payments to broadcasters. The paper notes that these retransmission consent fees are now a significant revenue source for many stations, funding their local news operations.
Research cited in the paper, analyzing nearly 400 retransmission agreements from 2011 to 2018 by Eun-A Park, Rob Frieden and Krishna Jayakar, found that larger MVPD customer bases were associated with more frequent and longer programming blackouts. Multi-station broadcaster groups affiliated with networks also saw more blackouts, though they were shorter. The paper highlights that networks like One America News Network and NewsMax have opposed proposed broadcaster consolidation, fearing that larger broadcast groups could demand higher retransmission fees, potentially leading distributors to drop smaller networks to control costs.
One potential solution, presented in the paper, is to eliminate the retransmission consent and must-carry framework entirely, treating broadcasters like other content creators and relying on copyright law and voluntary contracts with distributors. The authors also suggest incremental changes, such as strengthening good-faith negotiation requirements under existing FCC regulations, limiting automatic fee increases when broadcasters acquire more stations, and introducing arbitration mechanisms for situations where high-value programming creates significant negotiating leverage.
FCC Chairman Brendan Carr commented after the September vote that ownership rules need updating, given the competitive pressures from streaming platforms and social media companies now capturing advertising dollars previously allocated to local television. The paper also emphasizes that while the FCC’s authority to alter the 39% ownership cap is debated, the agency has clear authority under Title VI to define and enforce bargaining standards for retransmission consent negotiations. The authors highlight that the current regulatory framework was intended to address concerns about cable providers’ control over programming.
They reference a 2009 U.S. Court of Appeals for the D.C. Circuit opinion in *Comcast v. FCC*, stating that cable operators “no longer have the bottleneck power over programming that concerned the Congress in 1992.” The paper illustrates how economic pressures impact local television stations differently depending on their market position. For example, WOOD in Grand Rapids, Michigan, operated by Nexstar Media Group, reduced syndicated programming and added local news blocks. Conversely, WNWO in Toledo, Ohio, a Sinclair Broadcast Group station, ceased producing 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 lead to unforeseen consequences within the regulatory system.