Key Points
- Optimum urged the FCC to revisit rules barring pay TV providers from importing out-of-market network affiliates during carriage disputes with local broadcasters.
- The cable operator warned Nexstar’s proposed $6 billion TEGNA acquisition could drive higher retransmission fees and more blackouts for subscribers.
- Optimum also called for tighter scrutiny of sidecar arrangements and protections preventing merged broadcasters from renegotiating higher fees.
Cable television provider Optimum has encouraged the Federal Communications Commission (FCC) to review its rule that prohibits pay TV platforms from replacing a local broadcast station with a comparable network affiliate from another market during programming-related disputes.
The proposal was floated during an all-encompassing meeting between FCC officials and Optimum executives last week that gave the cable TV provider an opportunity to present its view on Nexstar Media Group’s $6 billion proposed acquisition of TEGNA and other current and anticipated media transactions between broadcasters.
FCC Chairman Brendan Carr attended the meeting, according to a disclosure letter reviewed by The Desk. Before the meeting, Carr told reporters that he expects Nexstar’s proposed acquisition of TEGNA to go through and was willing to back the deal.
The FCC must approve the transfer of around 60 broadcast licenses held by TEGNA before the acquisition can close. Doing so requires a lifting of current ownership caps that prevent one broadcaster from owning stations that reach more than 39 percent of the Americans or granting waivers to its ownership rules for each station that Nexstar will acquire.
Nexstar is one of several broadcasters that enters into novel arrangements with other companies that hold FCC-issued licenses for TV stations on paper while allowing Nexstar to control and operate them. Mission Broadcasting and White Knight Broadcasting are two such companies — commonly known as “sidecars” — that allow Nexstar to operate their stations and enter into distribution agreements with cable and satellite providers on their behalf.
Nexstar has raised fees on pay TV distributors over the past decade, which are passed along to cable and satellite subscribers in their bills. In recent years, some companies have opted to pull Nexstar-owned and operated channels instead of agreeing to their demands for higher fees.
Optimum was in that position last year, when its customers in several states lost access to local TV channels owned or operated by Nexstar. During the dispute, Optimum complained that Nexstar was demanding more money for its stations and carriage of NewsNation, its national cable news channel. The channels were restored under a new agreement with Nexstar about two weeks later. (Optimum was known as Altice USA until last November.)
Optimum recounted the situation during their meeting with Carr and officials from the FCC’s Media Bureau, while offering the perspective that cable bills are likely to increase and programming-related disputes become more common if broadcasters like Nexstar and TEGNA were allowed to consolidate.
But Optimum executives also offered solutions if Carr and others are interested in clearing the way for broadcasters to grow larger. Under the FCC’s current rules, local network affiliates have exclusivity in the cities where they serve, which prevents cable and satellite TV operators from replacing their signals with a similar station from another town when distribution disputes arise.
Optimum said the FCC should review its rules “that prevent cable providers from importing a substitute broadcast signal during blackouts” as one way to ensure Americans aren’t deprived of major network programming like news and sports when broadcasters demand more money for their stations.
Additionally, Optimum said the FCC should require companies like Nexstar and TEGNA to maintain the integrity of their current distribution agreements with cable and satellite providers, even after the broadcasters merge their operations, rather than trying to exert higher fees based on a more-favorable contract, and the agency should crack down on the use of sidecar arrangements by counting shared services agreements as ownership for purposes of their rules.
Nexstar is the largest broadcaster that has tested the waters of the FCC’s willingness to change its rules. Its announcement on the acquisition of TEGNA came several months after Nexstar began lobbing its local TV station executives and news viewers to contact the FCC with demands that the agency loosen its broadcast TV ownership rules.
Nexstar and other broadcasters contend the current rules hamstring its ability to compete against streaming services that are backed by major media and tech companies. Services like YouTube, Netflix and Prime Video have grabbed lucrative entertainment and sports rights in their pursuits for more TV advertising dollars; unlike broadcast TV, those platforms are not regulated by the government on the basis of ownership or content.
The FCC is currently weighing various proposals to amend or lift its broadcast ownership cap. Some opponents say the FCC has a statutory obligation to enforce an ownership cap after Congress tasked the agency with doing so through an amendment to the Communications Act.
