From RBR.com

Apple is now barring all single-station radio applications from the iPhone and iPad, saying that single station apps are the same as a “fart” (yes, the sound) app and represent spam in the iTunes store. So says Jim Barcus, the president of DJB Radio Apps, which helps build iPhone, Android and Blackberry apps and other mobile apps for radio stations across the country.

In September, Apple published new App Store review guidelines and farts were one of the things disallowed. As part of those guidelines, it looks like Apple began rejecting single-station radio apps on 11/10, declaring that it “will no longer approve any more radio station apps unless there are hundreds of stations on the same app.” If Barcus is right (and there is some dispute on this), it would be great news for iHeartRadio, RadioTime and the like, but not so much if your stream isn’t bundled with a large aggregator.

Says Barcus on his website:

“In a nutshell, Apple really does not want any more single station iPhone apps in the app store.

Since April we have been creating iPhone apps for radio stations with great success. The stations that have ordered them from us love them and it is one more way for the stations to get and keep their listeners. Not only can the listener rely on the app for entertainment, but they get the local news, sports and weather for the local station that they like to listen to.

Nov. 10 represents the date that Apple started rejecting apps. We have talked to many Apple reps about this, but they appear to have a script that they all read from saying that a single-station app is not an enriching end-user experience. We disagree, since our single-station apps have had more than 44,000 downloads in the past month.

Apple implemented a new rule that says “developers ‘spamming’ the App Store with many versions of similar apps will be removed from the iOS Developer Program.” Furthermore in the same document, they compare these apps that spam the App Store to Fart apps.

Apple is basically forcing all radio stations onto one app regardless of genre, age limitations, etc. I have argued that radio stations do not want to be on the same app with all the rest of the stations in the same town; and Apple’s answer was “too bad.” Apple even has a Rule 3.1 in the App review rules that states, “Apps with metadata that mentions the name of any other mobile platform will be rejected.” If this rule is good enough for Apple, why do radio stations have to be forced to have its competitors on the same app?

Furthermore, Apple does none or very little advertising on the radio. They never needed to because of all of those radio stations that have an app for their listeners give out hundreds of free mentions of the iTunes App Store every day to download their app and the hundreds if not thousands of page hits per day of listeners that click on the “Available in the iTunes Store” logo directing them to get their apps.”

Barcus also wrote an e-mail to Steve Jobs, Apple CEO, and his response was “Sorry, we’ve made our decision.”

“I really don’t think he cares about radio stations at all. Everybody at Apple has the same stance. No more radio station apps, though every pizza joint can have its own app,” said Barcus. “There are more than 900 Flashlight apps. More than 3,000 apps that do maps. But radio stations cannot have their own. Android Market and Blackberry World both like radio station apps for their platforms; but iTunes for some reason will not budge on what it calls spam applications.”

He’s also recommending that if stations want their own radio station app they should call call Apple HQ at (408) 996-1010 and lodge a complaint or send an e-mail to Steve Jobs at sjobs@apple.com.

Claiming that Barcus is wrong, Paul Jacobs, VP/GM Jacobs Media/jacAPPS, tells RBR-TVBR that he’s been able to build radio station apps since Nov. 10: “Since that date, we have had apps for radio stations accepted as new as well as upgrades.  And we are not alone.  I invite you to go to the iTunes App Store and go into the “free” apps portion of the Music section.  There you will see examples of dozens of radio stations – domestic, international, and Internet -  that have been accepted and/or upgraded since November 10.”

10-19-10 Retrans Draft Legislation

From Politico.com

Business deals are successfully negotiated every day throughout America. The common thread is a mutual desire to reach an accord. And the media business is no different.

For nearly two decades, local television broadcasters and pay-television operators have taken part in this marketplace, negotiating the carriage rights for the high-value entertainment and local news programming supplied by local TV stations and their broadcast network partners. This negotiation process, known as retransmission consent, boasts a staggering success rate. More than 99 percent of the negotiations have been resolved amicably — and without disruption of TV service.

The system works so well because both parties — broadcast TV stations and pay-TV operators — have enormous and equal incentive to reach a fair agreement.

History shows that pay-TV subscribers flee in droves to alternative providers when there is even a rare service disruption — demonstrating a quantifiable value for “must-have” broadcast programming. Cable and satellite operators, meanwhile, deliver additional viewers to the broadcast TV station. If no deal is reached, there is equal risk for all. Pay TV loses subscribers; the broadcast TV station loses ad revenue.
This mutual incentive is jeopardized only when one of the negotiating parties has the expectation that it might receive government assistance should talks break down. Recognizing the overwhelming historical success of retransmission consent, some pay-TV operators have undertaken a cynical campaign to manufacture market failure in the hope that Congress will rewrite established law — and tip the scales in pay TV’s favor. The government must resist this course of action.

Beyond the undisputed free-market nature of retransmission consent are the many social benefits enjoyed — if not taken for granted — by all Americans. Indeed, TV broadcasters reinvest the revenue from these agreements in robust local and national news operations, marquee sporting events like the Super Bowl and popular programs like “30 Rock,” “Glee,” “CSI” and “Modern Family.”

Without this essential revenue, broadcast viewers would face a diminished local news product, fewer public affairs programs and a further migration of sports and entertainment programming to pay TV.

Most important is that this retransmission revenue supports a local news and entertainment platform for the more than 30 million Americans who are unable, or unwilling, to pay for cable or satellite TV.

If policymakers are serious about avoiding a society of TV “haves and have-nots,” they should refrain from policies that favor pay-TV operators over the providers of our nation’s only free and local communications system: over-the-air broadcasting.

As a former legislator, I understand the good intentions of some of my former congressional colleagues, who have proposed government intervention into private negotiations. Tempting as they may be, such proposals serve only as a disincentive to pay-TV operators, which may already be reluctant to negotiate in good faith.

Pay-TV companies that built their businesses on the backs of local and network broadcast signals should pay a fair price for access to that high-value programming. Legislators and policymakers should reject pay TV’s call for government intervention and reinforce the power of market-based negotiations.

This move would signal to current and future retransmission-consent participants that the ultimate success of their business lies solely in their own ability to negotiate fairly.

Lamar Smith (R-TX)

During a March 2009 hearing on the Performance Rights Act, House Judiciary Ranking Member Lamar Smith (R-TX) urged further study on the matter during his opening remarks, and when push came to shove at a mark-up over a year later, was one of nine votes against the measure, which nevertheless passed easily with 21 yea votes.

The Republican Party regularly shuffles the deck when it comes to committee leadership positions, so there is no guarantee that the Republican ascension to House majority status will leave Smith in the Judiciary chair.

However, as current Ranking Member Smith would appear to have the inside track, and is almost certain to be a senior member of the committee whether or not he’s in the top slot.

Smith is not one of the Republicans who are co-sponsors of the bill, nor is he one of the 260 or so who signed the Local Radio Freedom Act opposing it.

In remarks at a 6/4/09 hearing, Smith said that the two industries need each other, and opined that “…they are likely to need each other for some time to come.” He suggested a third party study before taking any action. A subsequent study from the GAO yielded inconclusive results.

Smith joined seven other Republicans in voting against the bill in markup 6/23/10. The only Democrat to join them was Maxine Waters (D-CA). 21 committee members supported the bill.

Here are Smith’s opening remarks delivered at the 3/10/09 hearing:

Mr. SMITH. Thank you, Mr. Chairman.

The purpose of copyright law is to promote the public interest by encouraging the creation of new works of authorship. To accomplish this, the law seeks to balance the interest of creators in receiving compensation for their work with a public benefit that is derived from encouraging greater access to such works.

The fundamental question presented by H.R. 848, the Performance Rights Act, is to what extent the copyright law should give rise to a royalty payment each time a sound recording is performed publicly. Requiring a full statutory performance right for sound recordings is a change that has been sought by performing artists in the record industry for years.

H.R. 848 amends Section 106 and 114 of the copyright act to eliminate the exemption that AM and FM radio stations have enjoyed since the development of broadcast radio. The exemption permits these stations to broadcast sound recordings to the public without having to compensate performing artists. Proponents of current law assert that performing artists, particularly those with an active recording contract, benefit financially from having their songs performed extensively over free radio. They have asked why, if radio does not promote music sales, do artists and record labels send free CDs to radio stations and encourage programming managers to have their tracks spun as often as possible.

On the other hand, copyright owners note they should be entitled to exercise their rights to license the use and distribution of their works. They assert that when the law restricts them from doing so, they should at the very least be compensated for the commercial use of such works.

The economic downturn has resulted in a double hit for radio stations. It affects the ability of radio stations to generate revenue through advertising sales, which have decreased over 20 percent in the last 2 years. It also affects their ability to raise capital and secure financing to continue operations.

While the economic future of radio stations, recording artists and record labels is uncertain, my own view is that they are likely to need each other for some time to come. The sooner the parties recognize and accept this fact, the better for all concerned. Frankly, though, negotiation on the subject of performance rates is unlikely in the near future. So in the short term, what I propose is that the parties agree to have a third party entity conduct an objective study of the economic impact of royalty payments on performing artists and radio stations.

Stakeholders would offer issues to be evaluated, and at least there will be some quantitative analysis to help mold legislation.

Such a study would need to be conducted by a party that is clearly not aligned with either side of the debate. This entity would evaluate the likely impact of a range of royalty rates in a variety of economic circumstances.
During my time for questions, I will ask our witnesses if they will agree to this proposal. Before Congress chooses to act or withhold action on any matter, we have an obligation to ensure all legitimate concerns are fairly reviewed and addressed.

Mr. Chairman, thank you for having this hearing today. And I’ll yield back the balance of my time.

RBR-TVBR observation: This is one of the many broadcast issues for which Congressional party lines are blurred – but not all that blurred. Five Republicans supported PRA during the June vote, while eight were against. Only one Democrat voted against. And for sure, the loudest voice supporting PRA, outgoing Chair John Conyers (D-MI) will be muted going forward.

Two Strategies, One Future

A lot has been said and written in recent days concerning the NAB Radio Board’s vote supporting a multi-tiered proposal that could ultimately result in stations paying a limited performance fee for playing music. Ridiculous conspiracy theories have been proffered. Apocalyptic analogies have been suggested. The motives of NAB and its leadership have been questioned.

It’s time to set the record straight.

No doubt, smart and well-intentioned radio veterans can find themselves on opposite sides of this debate. But what everyone must recognize are the consequences we will face if we are perceived — rightly or wrongly — as obstructionists by Congressional leaders who have demonstratively shown sympathy for the record label position.

And those consequences are potentially very grave.

There is no doubt that free airplay on local radio is an unparalleled promotional tool enjoyed by artists and record labels alike. With that undisputed fact in our arsenal, radio has for decades rightly and successfully opposed any attempt to impose a performance right, royalty, fee, or tax on local stations for the mere privilege of promoting an artist’s music and making that artist rich and famous.

Moreover, the NAB has proven exceedingly effective in its advocacy efforts during the current session of Congress. More than 260 House members and 27 U.S. Senators stand firmly against a performance fee, even though legislation has proceeded further in this Congress than ever before. Both the House and Senate Judiciary Committees have given the recording industry a thumbs-up.

The Performance Rights Act, still vigorously opposed by NAB, awaits only a floor vote in each Congressional chamber — action that could come as part of larger, unaffiliated legislation passed after this week’s midterm elections by a ‘lame duck; Congress. That legislation, as Marci Ryvicker, a well-known and reputable financial analyst from Wachovia-Wells Fargo, has estimated, could cost radio between $2 billion-$7 billion annually.

We are fortunate to have the leadership of Gordon Smith, a former two-term U.S. Senator who is respected by both Democrats and Republicans. It’s true that Senator Smith is not a radio broadcaster like Eddie Fritts once was. He is, nonetheless, a true gentleman and sincerely committed to the issues of radio and has proven exceedingly skillful in dealing with difficult terrain that we are facing inside the Beltway. His hiring gave NAB renewed credibility and instant clout last year. And, to put it bluntly, his hiring may be the only reason the Performance Rights Act has not become law in the current session of Congress. But beyond the specific issue of a performance fee, NAB and radio at large finds itself navigating a political minefield in Washington, where “just say no” is not a strategy for long-term success.

Indeed, as long as we appear unwilling to rationally discuss an issue of importance to key members of Congress, radio’s Washington ‘wish list’ remains dead on arrival. Any attempt to pass future legislation that would benefit radio will be immediately greeted with a performance fee amendment.

Checkmate?

Of greater concern, however, is the likelihood for amplified collateral damage — in the form of legislative attempts to saddle radio with onerous regulatory hurdles, spectrum taxes, localism mandates, or diminished interference protections.

And so we find ourselves at a crossroads.

Option A is one of familiarity. We continue to say not only “No,” but “Hell, no” to a performance “tax.” It’s worked before, and it might work again — perhaps long enough to get many of us to retirement. But make no mistake: Option A has an expiration date. Maybe not this Congress or the next — but at some point in the not-so-distant future, legislation will likely be passed, and the future of radio may include a performance fee set by a three-judge panel of bureaucrats known as the Copyright Royalty Board.

Option B is new and less familiar. We leverage our position of strength — the decades of legislative success demonstrated by NAB, the nearly 300 lawmakers who stand opposed to the Performance Rights Act, and a future Congress that will likely be less regulatory than the current — and we craft a deal on our terms and in the best long-term interest of radio. That is precisely what the NAB Radio Board has voted overwhelmingly to do.

No broadcaster wants to pay a performance fee; that’s a given. But consider what we might get in return:

– a strengthened foothold in mobile phone devices, putting us in a position to effectively compete on a device carried in nearly every American’s pocket;

– decreased streaming rates and the ability to simulcast our signal — commercials and all — on our respective websites, increasing radio’s ability to grow our online revenue;

– removal of the Copyright Royalty Board from rate setting of over-the-air and online rates, forever;

– and recognition from both Congress and the music industry — written into statute — that the promotional value of radio is unparalleled in comparison to any other audio platform in existence. Those words, signed by the President and written into law, will be what radio points to should the music industry ever have the audacity to ask for more.

In exchange, radio would agree to pay a limited performance fee that amounts to less than one percent of net revenues. The initial fee could be even less — as low as 0.25%, if the recording industry chooses not to support a legislative mandate for radio-enabled mobile devices.

Option B is not without its risks. But if successful, radio wins hands down.

Representing the diverse nature of radio, our stations span from the largest markets to the smallest towns, from major station groups to small regional clusters — publicly held companies, privately held stations. And yet despite these differences we share a mutual commonality: a truly sincere commitment to securing a vibrant future for radio.

We ask that everyone in radio study carefully the Term Sheet adopted by the NAB Board last week, and we ask for your support.

Members of the NAB Radio Board Executive Committee

NAB Radio Board Chair
Caroline Beasley
Executive Vice President and CFO
Beasley Broadcast Group
Naples, Fla.

Lew Dickey
Chairman, CEO and President
Cumulus Media
Atlanta, Ga.

Rick Cummings
President — Programming
Emmis Communications
Burbank, Cal.

Randy Gravley
President and CEO
Tri State Communications
Jasper, Ga.

The National Association of Broadcasters Radio Board, in a press release sent last night, voted in favor of sending the following terms to the representatives of musicFIRST regarding the performance tax issue.

NAB press release:

WASHINGTON, DC — The National Association of Broadcasters Radio Board of Directors, meeting at its regularly-scheduled Fall Board meeting in Washington today, voted in favor of presenting musicFIRST representatives a legislative “Term Sheet” designed to resolve the longstanding performance fee issue. The Radio Board conditioned their support for today’s Term Sheet on the understanding that all provisions would remain part of any legislative package. Today’s vote is subject to ratification by the NAB Joint Board of Directors, which will meet Tuesday afternoon.

“NAB remains 100 percent opposed to performance fee legislation pending in Congress,” said NAB Radio Board Chair Caroline Beasley, CFO of Florida-based Beasley Broadcast Group. “However, in a good faith effort to resolve this issue in the best interests of both radio and the music industry, we have endorsed a solution ensuring that broadcasters have a foothold in digital platforms of tomorrow.”

“Today’s endorsement includes provisions that are essential to the future of free and local radio, and we’re hopeful that the musicFIRST Coalition finds it in their best interest to say ‘yes’ to this proposal,” Beasley said.

Under language included in the Term Sheet, music-playing terrestrial radio stations would agree to pay a limited performance fee, which would be set at between 0.25% and one percent of a station’s net revenue, depending on a provision related to the penetration of radio-activated mobile phones in the U.S. Today’s endorsement from the NAB Radio Board was made with the understanding that any legislative resolution supported by NAB must include the following:

– Permanent removal of the Copyright Royalty Board from rate-setting of transmissions of terrestrial on-air music or Internet streaming;

– Resolution of the “AFTRA issue” outside of the legislative process by the musicFIRST coalition that would facilitate simulcast of over-the-air radio commercials on the Internet;

– musicFIRST’s acknowledgment and recognition of the unparalleled promotional value of terrestrial radio airplay;

– Simplified airplay reporting requirements similar to the model used by ASCAP/BMI;

– Congressionally-mandated radio-activated chips in mobile devices such as cell phones and BlackBerry smartphones, with an acceptable phase-in period and inclusion of HD Radio chips when economically feasible. If a legislative mandate (which musicFirst has agreed to support) becomes initially unattainable, radio broadcasters would agree to an initial performance fee payment of .25% of net industry revenue. Under this scenario, the performance fee would mirror the actual percentage of radio-activated mobile phones in the United States. Once market penetration of radio-activated mobile devices reaches and maintains a level of 75 percent of all mobile devices, broadcasters agree to pay the full one percent terrestrial transmission performance fee.

– Assuming a successful mandate of radio-activated chips in mobile devices, streaming rates that broadcasters pay for simulcasts, webcasts and other non-terrestrial transmissions of music through 2016 would be reduced. In the event that a legislative mandate for radio chips in mobile devices is not achieved, the streaming rate reduction would not take effect until 50 percent of mobile phones have radio chips;

The Term Sheet provides accommodations for small radio station operators, noncommercial stations, religious broadcasters and incidental uses of music by news/talk and sports stations.

The Term Sheet also envisions that both the radio and music industry will work cooperatively to offer consumers more and better ways to listen to music.

The Radio Board’s action is a culmination of more than a year of discussions and dialogue between radio executives, the NAB and its membership, musicFIRST, and key leaders in Congress. It comes after more than 260 members of the U.S. House of Representatives and 27 members of the U.S. Senate expressed bipartisan opposition to pending Performance Rights Act legislation that was passed out of two committees in Congress last year.

“From a position of strength, we have fashioned a Term Sheet for resolving the performance fee issue that in the long run is acceptable for radio,” said NAB Joint Board Chairman Steve Newberry, president and CEO of Kentucky-based Commonwealth Broadcasting. “No broadcaster that I know relishes paying a new fee, but the terms of this agreement provide badly needed certainty for our business to move forward, and the positives of this accord far out-weigh the negatives.”

NAB President and CEO Gordon Smith said the Term Sheet “represents a path forward for radio broadcasters and musicFirst to resolve this contentious issue in a manner that is fair and equitable to both sides. Radio stations, artists and the record labels have more commonalities than differences, and adoption of legislation that reflects this Term Sheet will provide a framework for untold new revenue opportunities for both sides. We look forward to working with musicFIRST and its allies for swift legislative adoption of this entire package of initiatives that will help our businesses flourish in the digital age.”

The Term Sheet as approved by the NAB Radio Board of Directors is available in its entirety here. (PDF Format)

Yesterday, the Massachusetts Broadcasters Association, along with 45 other State Broadcasters Associations, the National Association of Broadcasters, National Cable and Telecommunications Association, Society of Broadcast Engineers, American Cable Association, Association for Maximum Service Television, National Public Radio, Association of Public Television Stations and Public Broadcasting Service, urged the FCC to extend the current March 29, 2011 CAP-compliance deadline to at least September 30, 2011 or later, as well as to consider holding the deadline in abeyance until the FCC has completed its own CAP-related equipment certification process and has resolved its anticipated rulemaking proceeding concerning modifications to Part 11 of its EAS rules and regulations.

We pointed out that it would be premature at best, and potentially very wasteful at worst, for some 25,000 to 30,000 EAS participants to be required to purchase, install and test new or modified CAP-related equipment in circumstances where (i) the IPAWS list of CAP tested and certified EAS equipment has yet to be released, (ii) the FCC may conduct its own certification process which could necessite further changes to equipment which FEMA has already approved, and (iii) the FCC may, as a result of an expected rulemaking, change its EAS regulations in ways that impact the future suitability of CAP-related equipment. We also urged the Commission to take into consideration the extra time needed for EAS participants to coordinate with their state and local representatives to insure that the conversion of government owned EAS equipment would be compatible with CAP-related equipment that radio and television stations, and others, may employ. Given the importance of getting “CAP” right the first time, we stressed that flexibility should be the watchword in this context.

National Association of Broadcasters response to Senator Kerry’s legislation draft:

WASHINGTON, D.C. — The National Association of Broadcasters issued a statement today regarding the fair, market-based carriage negotiation process known as retransmission consent.

Commenting, NAB Executive Vice President Dennis Wharton said:

“As history has shown, 99.9 percent of these deals are reached without disruption. We don’t have a broken system; we have a broken pay-TV company that likes to play Washington games. Broadcasters and pay-TV operators share a mutual interest in reaching a fair, market-oriented carriage deal. Only when one party shifts their focus, pleading to government instead of negotiating fairly, does that mutual desire dissolve.”

Retransmission consent is the fair, market-based negotiation process by which pay-TV operators and broadcasters reach an agreement for the carriage of a TV station’s signal. For more information on the market-based negotiation process, visit NAB’s Policy Blog.

Senator John Kerry (D-MA) Press Release from October 19th:

WASHINGTON, D.C. – Senator John Kerry (D-Mass.), Chairman of the Commerce Subcommittee on Communications, Technology, and the Internet, today sent a letter to Federal Communications Commission (FCC) Chairman Julius Genachowski with draft legislation to protect consumers during disputes between broadcasters and cable providers that sometimes lead to televisions going dark and often threaten to disrupt service.
For years, Kerry has urged both broadcasters and cable providers to keep TV signals up during their contract negotiations, but in recent years, TV blackouts or threats of blackouts during major events such as the college bowl games and the Oscars have too often been the result of these retransmission disputes.
“It’s not our job to take sides, but it is our responsibility to help find a better way forward,” said Sen. Kerry.  “The goal of this legislation is to offer a path towards resolution that reforms a broken system and protects the consumers who get caught in the middle. I look forward to feedback from the FCC and collaboration and input from all stakeholders. This system today isn’t working for anyone.”
Kerry’s legislation, which he intends to introduce in the upcoming “lame duck” session, would prevent television signals from being pulled until both broadcasters and cable companies have gone through a process with the FCC to ensure good faith negotiations and consider arbitration as an option.
The full text of the letter is below:
October 19, 2010
The Honorable Julius Genachowski
Chairman
Federal Communications Commission
445 12^th Street, SW
Washington, D.C. 20004

Dear Chairman Genachowski:

As you know, News Corp. (FOX) and Cablevision failed to reach an agreement on Friday for the retransmission of WNYW (NY channel 5), WWOR (NJ channel 9) and WTXF (Philadelphia channel 29).  As a result, approximately 3 million Cablevision subscribers in New Jersey, New York and Connecticut were left without access to these broadcast channels, including the widely watched New York Giants game this weekend.  As the New York Times recently reported, these sorts of confrontations are now “a regular event;” indeed, Bloomberg News recently reported that “TV blackouts in the U.S. have reached the highest level in a decade and may climb as pay-TV operators fight higher fees sought by content producers.”

Rather than take sides in a conflict of corporate interests, we can all agree that this system works least of all for consumers, the primary interest we represent in matters of public policy-making.  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.  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.

The voices of angry consumers in this weekend’s news coverage speak volumes. Many football fans had to leave home, denied the service they faithfully pay for, and even bring their children to bars to watch the game. As one person, Marilyn Odell, told the New York Times, shouting to be heard above the crowd, “We’re too old to be in this place.”  A separate Associated Press story detailed one of the owners of a bar that depends on its Cablevision subscription complaining, “This is ridiculous!…I’m relying on people to come in who are Giants fans – and they’re walking out, even though I pay for the football package.”  He went on to say that “regular, everyday people get caught in the middle.”

There are important equities and business interests at stake in these negotiations, and in this most recent case, both sides believe they’ve negotiated in good faith. It’s not our job to take sides – but it is clearly our responsibility to ask whether there’s a better way forward as these kinds of situations rise in frequency. In addition to this most recent dispute, just last March, Cablevision and Disney/WABC-TV failed to reach an agreement and the WABC-TV signal was pulled from Cablevision.  While that signal was eventually restored, it was only after Cablevision customers were without WABC-TV for approximately 20 hours, including the first 15 minutes of the Academy Awards (Oscars) broadcast.  And upcoming retransmission consent negotiations between FOX and the DISH Network which will include thousands of households in Boston and millions nationwide, and in December between Mediacom and Sinclair Broadcasting, could put even more Americans at risk of losing television programming that they have come to expect and rely on for their local news and entertainment.

This spring, you testified before the Senate Commerce Committee that the retransmission consent system was under review and had been since the previous New Year.  Further, a petition that seeks to modify the FCC’s rules for retransmission consent negotiations has been pending before the FCC since March 2010.  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.

A discussion draft of the legislative language is attached.  The process we are trying to effect is two party negotiations that have a big impact on an unrepresented third party; consumers.  The goal is to offer a path to potential resolution of differences and protect consumers.  It would stave off the termination of carriage on expiration of an agreement and allow signals to continue transmitting until the FCC evaluates the behavior of the parties and recommends or does not recommend binding arbitration during which carriage would continue. At the end of the day, the broadcaster would retain the right to pull the signal when there is a good faith impasse on terms, but it would not be able to do so without much greater transparency in process and a more systemic effort at reaching agreement without consumers getting caught in the middle.

In short, in any broadcaster-distributor negotiation, there are four basic possible impasse scenarios, for which I am considering a new process of resolution as follows.  Once both parties agree that they have reached an impasse, they both submit their last best offer for FCC evaluation and:

·         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.

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.

Sincerely,

John F. Kerry