FCC Adopts Network Nonduplication, Syndicated Exclusivity and Sports Blackout Rules for Satellite Carriers
On November 2, 2000, the FCC released its Report and Order (the “R&O”) adopting cable-like network nonduplication, syndicated exclusivity, and sports blackout rules governing the delivery of satellite retransmitted superstations and distant network stations to direct-to-home (“DTH”) satellite subscribers. The new rules were promulgated pursuant to new Sections 339(b)(1)(A) and (B) of the Communications Act, added by the Satellite Home Viewer Improvement Act of 1999 (“SHVIA”) (see our advisory dated December 7, 1999). SHVIA extended the existing satellite compulsory license for delivering superstations and distant signals to DTH subscribers (17 U.S.C. § 119) and also added a new compulsory license authorizing satellite carriers to deliver previously prohibited local stations to DTH subscribers in local markets (“Local-into-Local”) (17 U.S.C. § 122). As part of the legislative compromise, Congress required the FCC to adopt network nonduplication and syndicated exclusivity rules for DTH delivery of “nationally distributed superstations,” which include KTLA-TV, WPIX-TV, KWGN-TV, WSBK-TV, WWOR-TV, and WGN-TV.1 SHVIA also required the FCC to adopt sports blackout rules for nationally distributed superstations and distant network stations that are delivered to DTH subscribers.
The DTH industry had previously been exempt from program exclusivity rules. In a 1991 proceeding the FCC found that it was impractical to subject superstations to exclusivity restrictions. However, under the satellite copyright license in effect at that time, distant network stations could only be delivered to “unserved households” (those households that could not receive a local affiliate off-air). This restriction is similar to that of network nonduplication except that it blocks distant network signals entirely, not just network programming (see CRB memorandum dated February 8, 1999). Litigation over the “unserved household” restriction was intense and part of the impetus for reform of the copyright laws governing the delivery of broadcast signals to DTH subscribers generally (see our advisory dated July 15, 1998 and January 7, 1999). The “unserved household” restriction was maintained in the extension of the distant signal satellite copyright license.
The FCC’s new satellite rules cover all DTH subscribers, including those receiving small dish DBS services (EchoStar, DirecTV) and large dish C-Band services. The rules apply to the individual satellite carriers that uplink and distribute the services. Congress directed that the new satellite program exclusivity rules be “as similar as possible” to the rules applicable to cable operators. The new and separate rules for satellite carriers allow for minor adjustments to the cable rules that the FCC deemed were necessary to properly apply the rules to DTH markets. (The FCC also found some old minor errors in the cable rules that were corrected in the R&O). Similar to cable, there is an exemption from all three rules in areas where a satellite carrier distributes a particular superstation or network station signal to less than 1,000 subscribers in a zone where blackouts are demanded.
1. Network Nonduplication and Syndicated Exclusivity Protection
The current network nonduplication rule applied to cable operators allows a television broadcast station that has purchased exclusive rights to network programming within a specified area to demand that a local cable system’s duplicate carriage of the same program from an otherwise distant station be blacked out (subject to exceptions described below). The syndicated program exclusivity rule (the “syndex” rule) is similar to the network nonduplication rule, but it applies to exclusive contracts for syndicated programming, rather than for network programming. Similar network nonduplication and syndex protection will now be extended to broadcast stations against satellite carriers retransmitting “nationally delivered superstations” in the relevant zone of protection if the program license agreements clearly state that the exclusivity provisions apply against satellite carriage.2 The FCC will allow a six-month transition period to allow parties the opportunity to amend or clarify their existing network affiliation or syndicated exclusivity agreements to include specific language as provided by the rules.3
Broadcast stations may assert exclusivity rights against distant signals even if their own signal is not retransmitted by the satellite carrier. Moreover, for new syndications, rights holders may assert exclusivity for a period of one year from the initial broadcast syndication licensing of such programming (except in areas where the syndicator has already licensed satellite blackout rights to a local station). This will allow syndicators time to negotiate exclusive arrangements in each market but still prevent the showing of programming in that market until the market is licensed.
The cable network nonduplication and syndex rules are applied to cable systems in a “community unit” within a zone of protection. Because satellite carriers do not utilize anything like a “community unit,” satellite exclusivity rules will apply to subscribers based on zip codes within a “zone of protection.” The “zone of protection” for cable and satellite will be the same: for network nonduplication, the zone of protection is within the 35-mile area surrounding a broadcast television station’s community of license reference point, or the 55-mile area for “smaller” (below 100) television markets; for syndex, it is always within the 35-mile area.4
The FCC recognized that zip codes bisected by a 35 or 55 mile radius would have DTH subscribers both inside and outside the relevant zone of protection. While the rules provide for blacking out all subscribers in the affected zip codes, carriers can specifically geocode subscribers in the affected zip codes to determine whether their physical location is inside our outside the relevant zone of protection. The satellite carrier may limit blackouts to only those subscribers in the affected zip codes that are actually located within the relevant zone of protection.
2. Sports Blackout Protection
The purpose of the sports blackout rule is to ensure the continued general availability of sports programming to the public. The FCC adopted this rule based on the concern that sports teams would refuse to sell the rights to their local games to television stations serving distant markets due to their fear of losing gate receipts if the local cable system imported the local sporting event carried on a distant station when the game was not sold out at home. Unlike network nonduplication and syndex, Congress directed the FCC to apply the sports blackout rule to distant network stations only to the extent “technically feasible and not economically prohibitive.” The FCC found that the satellite carriers did not prove that the rules would not be feasible or economic and, therefore, applied the rules to the satellite distribution of distant network stations as well as nationally distributed superstations for DTH subscribers.5
3. Exemptions and Exceptions
While the FCC found that many of the cable exceptions, such as cable’s “significantly viewed” exception, would not be applicable in the satellite context, it included them for consistency. The Commission also adopted a comparable “small system” exemption for satellite carriers based on entire zones of protection, which would include several community units and zip codes.6 The satellite rules exempt satellite carriers with fewer than 1,000 subscribers within the entire zone of protection, as expressed by zip code areas within the zone, from deleting programming subject to network nonduplication, syndex, or sports blackout rules.
The FCC also rejected a proposal that blackout requests be non-discriminatory. Competing MVPDs may be subject to differing blackout obligations for the same programming.
4. Notification Requirements
The party seeking exclusivity or blackout protection must identify the affected zip codes for blackouts and provide them along with other information required in the existing cable rules to the satellite carrier. In the case of network nonduplication and syndex, notices must be provided to the satellite carrier within 60 calendar days of the signing of the contract. If the broadcast station or syndicator fails to provide notice within the required time, exclusivity protection cannot be asserted for the term of the contract (unless the contract is renegotiated thus starting a new 60-day notification period). For sports blackouts, notification periods are 60 days for regularly scheduled events, plus an additional notice within forty-eight hours of the time the telecast is scheduled. For unscheduled sporting events, notice must be given to the satellite carrier within 24 hours after the time of the telecast to be deleted is known, but in any event no later than 24 hours from the time the telecast is to take place. The FCC declined to adopt any reporting and auditing procedures, finding such procedures would place an undue burden on broadcasters, satellite carriers and the Commission.
The Commission is encouraging provision of substitute programming to fill the otherwise “blank screens” when there are blackouts. Although substitute programming is covered by the cable compulsory license, it is not covered under the terms of the satellite copyright license. Accordingly, substitute programming for DTH must have separate satellite copyright clearances.
5. Transition Period
The FCC adopted transition periods for all three rules. Under the network nonduplication and syndex rules, the Commission provided satellite carriers with 120 days before they are required to implement the necessary deletions for all notices provided before June 1, 2001 (the normal time requirements will apply to any notice provided to satellite carriers after that date). Additionally, under the sports blackout rules, sports rights holders would be required to give the full sixty days’ notice to satellite carriers for any sports blackout to occur on or before March 31, 2000.
The application of network nonduplication, syndicated exclusivity and sports blackout rules to satellite carriers is just one of the many proceedings that has been conducted during the past year as required by SHVIA (see our advisory dated December 7, 1999). The FCC has already issued orders regarding retransmission consent issues – requiring good faith negotiations and prohibiting exclusivity, and the establishment of an improved model for predicting the broadcast television field strength received at individual locations.
The FCC is currently conducting a rulemaking regarding new signal carriage rules for satellite carriers (the satellite “must carry” rules). In this proceeding, nothing was said that would indicate a position on digital must-carry for cable. “Because digital exclusivity issues are closely related to digital carriage issues, we believe it would be premature to resolve matters related to this issue at this time.” The FCC did rule that a broadcaster must have exclusive digital and analog rights to demand deletion of analog versions of the protected programming.
Please contact us if you would like a full copy of the Report and Order, or if you would like a copy of the new rules.
FOOTNOTES
1 The definition of “nationally distributed” superstation under SHVIA is restrictive, mimicking the restrictions on retransmission consent (47 U.S.C. § 325, as amended by SHVIA), so there is little chance that any other broadcast signals could become superstations. WGN’s satellite delivered superstation signal is non-network and syndex proof, so the new network nonduplication and syndex rules should not affect its distribution (sports blackout rules are described below). WWOR is no longer distributed as a superstation in the DTH market and WSBK was recently converted to digital. KTLA, WPIX and KWGN are WB “network” affiliates. The definition of “network station” under SHVIA is relatively clear as opposed to the definition of “network” under the cable compulsory license. The Copyright Office is expected to rule on “network” status for PAX under the cable compulsory license before year-end.
2 The network affiliates asked for network non-duplication rules to apply to distant networks as well, not just superstations. The FCC rejected that request as Congress specifically directed that only the sports blackout rules would apply to distant network stations. In any event, although the FCC did not discuss it, the “unserved household” restriction on delivering distant networks under the § 119 license protects local network affiliates against distant signals being delivered to subscribers within the local affiliates’ grade B contour, thus providing similar (if not greater) protection to local network affiliates.
3 The language to be included in the contracts is as follows: “the licensee [or other defined term] shall, by the terms of this contract, be entitled to invoke the protection against duplication of programming imported under the Statutory Copyright License, as provided in [§ 76.101 and/or § 76.123] of the FCC rules [or ‘as provided in the FCC’s syndicated exclusivity rules for cable or satellite carriage’]. Similar special language, while not required to invoke network nonduplication against cable operators, is required to invoke network nonduplication protection against satellite carriers. A satellite carrier is entitled to see the portion(s) of the contract needed to determine the extent of the rights holder’s right to exclusivity.
4 In hyphenated markets protected zones extend 35 miles from the city of license and each hyphenated city in that market as well. The zone of protection can never exceed the area agreed upon between the program supplier or network and the television station nor the area within which the station has acquired broadcast territorial exclusivity rights; the FCC’s rules provide the maximum that can be enforced.
5 The NFL asked the FCC to expand sports blackout protection to include blackout requirements against superstations and distant network signals for any game, not just the game that “duplicates” the local event, in order to protect its regional television packages. The FCC refused to expand the application of the sports blackout rules.
6 Cable systems are exempted based on 1000 subscribers per community unit (sports blackout) or 1000 subscribers per system (nonduplication and syndex). The C-band industry sought an exemption from the network nonduplication and syndicated exclusivity rules for their entire subscriber base. While no commenter specifically objected to this blanket exemption, the Commission found that it did not have the statutory authority to grant such an exemption.