Nexstar Media Group says the Federal Communications Commission (FCC) erred in certain legal interpretations when the agency imposed a $720,000 fine over the broadcaster’s dealings with a Hawaii-based cable operator last year.
In a filing made with the FCC last week, attorneys representing Nexstar said the FCC’s $720,000 fine proposed earlier this month has the potential to deprive the broadcaster of its right to seek certain terms in exchange for the privilege of allowing a cable TV operator to redistribute its channels.
Like other TV station owners, Nexstar elects for retransmission consent agreements with cable and satellite operators, which allows it to collect fees from pay TV distributors who offer their local ABC, CBS, CW Network, Fox and NBC affiliates to subscribers.
Last year, Hawaiian Telcom filed two complaints with FCC regulators while it was in the middle of negotiating a new carriage agreement with Nexstar concerning two Honolulu-based TV channels.
In its initial complaint, officials with Hawaiian Telcom said Nexstar turned down an offer to keep KHON (Channel 2, Fox) and another station on its cable TV systems under a temporary extension of its prior agreement. While that grievance was pending at the FCC, the cable operator filed a second complaint accusing Nexstar of demanding Hawaiian Telcom withdraw the first one as a condition of any new carriage agreement.
The situation was ultimately settled over the summer without any condition that Hawaiian Telcom withdraw its complaint.
Earlier this month, the FCC rejected Hawaiian Telcom’s first complaint, with the agency saying there was nothing in existing law that forced a broadcaster to consider an extension of a prior agreement. But it upheld the cable operator’s second grievance, with regulators finding Nexstar’s demand that the cable company withdraw its first complaint to be proof that the broadcaster was not negotiating in good faith toward a new agreement, as required under the law. It subsequently proposed a $720,000 financial penalty on the basis of the second complaint.
Nexstar promptly appealed, saying the FCC erred in allowing Hawaiian Telcom’s second grievance to succeed.
Hawaiian Telcom has also appealed the unfavorable opinion in the first grievance, with Nexstar filing an opposition to review of that matter on March 22. In its opposition filing, Nexstar said Hawaiian Telcom was trying to re-write rules for carriage negotiations between broadcasters and pay TV providers.
To that end, Nexstar said Hawaiian Telcom is living in a fantasy land where broadcasters must accept an extension of terms in a since-expired carriage deal while both sides work toward a new agreement.
“At bottom, the [application for review] seeks a ruling that broadcasters may not exercise their statutory right
to refuse [retransmission consent] in the midst of [similar] negotiations,” attorneys for Nexstar wrote in the March 22 filing.
“This amounts to an inappropriate request that the FCC, in this adjudicatory complaint proceeding, constructively amend its rules to add a new per se good faith negotiation standard of general applicability in a manner that is foreclosed by precedent and the statutory [retransmission consent] scheme,” the attorneys continued.
The attorneys went on to say that Hawaiian Telcom’s request for a review of the outcome of its first grievance appeared to be an attempt to re-write certain retransmission consent rules through the cable operator’s own unique interpretation of the law.
“The statutory and precedential basis for the [fine] determination on Count I is so unambiguous and unassailable that even [Hawaiian Telcom] acknowledges that Nexstar could not be required to agree to an extension of the previous [retransmission consent] agreement,” Nexstar’s lawyers said.
In other words, Hawaiian Telcom seems to understand that existing federal rules don’t require a broadcaster to accept an extension of prior retransmission consent terms while negotiating toward a new agreement — even while it subsequently tries to convince the FCC otherwise through its request for a review of its grievance on the same issue.
“This twisted reasoning threatens to swallow whole the clear principle that the FCC lacks authority to mandate carriage without the broadcaster’s consent,” Nexstar attorneys wrote. They later wrote that if the FCC reverses its prior denial of Hawaiian Telcom’s complaint, “the upshot would be an effective obliteration of the clear principle that broadcasters may not be forced to grant [retransmission consent].”
“Out of fear of being found to have acted in bad faith either by ceasing negotiations or by continuing them up to the deadline, broadcasters would be obligated to assent to last-minute requests to extend their previous grants of [retransmission consent],” the lawyers said.
The Board of the FCC rarely reverses orders issued by the agency’s Media Bureau, which presents a mixed bag for Nexstar. On the one hand, history shows the FCC is unlikely to award Hawaiian Telcom a review of its first grievance as requested — but it also means the FCC is unlikely to reverse the $720,000 fine imposed against Nexstar under the second grievance, too.
