Policy group calls for retransmission consent changes in FCC ownership rule review

The Federal Communications Commission should consider changes to retransmission consent rules alongside any modifications to broadcast ownership limits, according to a new policy paper from the International Center for Law & Economics, a conservative-leaning research organization.

The paper argues that the FCC’s current review of ownership regulations, initiated by a 3-0 vote in September, addresses only part of an interconnected regulatory system.

The authors contend that ownership caps, retransmission consent requirements and must-carry provisions interact in ways that affect negotiating 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 stated.

FCC opens broadcast ownership rules to scrutiny amid market transformation

Television broadcast ownership rules restrict any single entity from owning stations reaching more than 39% of U.S. television households. Congress established that cap in 2004. The FCC’s September notice of proposed rulemaking (NPRM) does not suggest specific rule changes but seeks comment on whether to retain, modify or eliminate several broadcast ownership regulations.

The International Center for Law & Economics paper, authored by Eric Fruits, Geoffrey A. Manne and Kristian Stout, noted that streaming services face no comparable national reach limitations. The authors observe that local broadcasters must compete with digital platforms for audiences and advertising revenue while operating under ownership caps created when broadcasters were considered dominant media companies.

Retransmission consent framework

Under the 1992 Cable Act, broadcasters choose every three years between must-carry status, which guarantees free carriage by cable and satellite providers, and retransmission consent, which requires multichannel video programming distributors to negotiate carriage rights. These negotiations often result in fee payments to broadcasters.

The paper described retransmission consent fees as approaching the scale of advertising revenues for many stations and identified these payments as central to how stations fund local news operations.

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Research cited in the paper analyzed nearly 400 retransmission agreements from 2011 to 2018.

The analysis, conducted by Eun-A Park, Rob Frieden and Krishna Jayakar, 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, though shorter in duration.

The paper noted that networks, including One America News Network and NewsMax, have opposed proposed broadcaster consolidation, expressing concern that larger broadcast groups could demand higher retransmission fees and potentially force distributors to remove smaller networks from channel lineups to manage costs.

Reform options

The paper presented the elimination of the retransmission consent and must-carry framework as one option, treating broadcasters similarly to other content creators and relying on copyright law and voluntary contracts with distributors.

The authors also outlined incremental changes, including strengthening requirements for good-faith negotiations under existing FCC regulations, limiting automatic fee increases when broadcasters acquire additional stations, and implementing arbitration mechanisms during periods when high-value programming creates negotiating leverage.

FCC Chairman Brendan Carr stated after the September vote that ownership rules require modernization, citing competitive pressures from streaming platforms and social media companies that now capture advertising revenue previously directed to local television.

The paper noted that while the commission’s authority to modify the 39% ownership cap remains subject to legal interpretation, the FCC has clear authority under Title VI to define and enforce bargaining standards for retransmission consent negotiations.

The authors stated that the regulatory framework was designed to address concerns about 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 described how economic pressures affecting local television stations varied by market position. WOOD in Grand Rapids, Michigan, operated by Nexstar Media Group, reduced syndicated programming to two hours between 9 a.m. and 8 p.m. and added local news blocks. WNWO in Toledo, Ohio, a Sinclair Broadcast Group station, discontinued locally produced 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 create unintended effects in the regulatory system.