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In Possible Threat to Must-Carry, GAO Says Broadcast License Phase-out Feasible

The Government Accountability Office has concluded that phasing out cable and satellite statutory licenses for the retransmission of broadcast content "may be feasible for most” participants, and the U.S. Copyright Office agreed. Must-carry rules could be threatened as a result.

GAO polled 42 stakeholders about such a potential phase-out and the results were pretty evenly split.

That is according to a just-released GAO study mandated by Congress in the STELAR Act, which renewed the satellite compulsory license.

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Of those stakeholders, 15 supported a full or partial phase-out, 14 did not, saying the current system works, and 13 took no position one way or the other.

The current system works by MVPDs paying a blanket license--$320 million in fees in 2014, for instance--for the non-local content on their TV stations, which then allows cable operators to negotiate retransmission consent for a TV station signal without having to negotiate separately for that network and syndicated content.

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Phasing out the license could be a threat to the must-carry regime, and the "carry one, carry all" DBS requirement, GAO has noted before, and did again in this report, which was released Wednesday, May 4.

That is because if Congress phased out the statutory license that applies to cable, it could conceivably mandate carriage of copyrighted content they had not gotten the rights to. And since "carry one, carry all" is premised on the satellite compulsory license, the requirement would no longer apply since it is premised on the license.

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Unlike cable operators, who must carry any TV station who elects carriage over a negotiation for fees, satellite operators don't have to carry any local stations, but if they do they must carry all of them in a market.

GAO also said that increasing the individual negotiations could lead to broadcast "blackouts," already a complaint by cable operators over retrans negotiations with blanket licenses. It would make sense that the more individual negotiations required, the more potential for disagreement and disruption, though some content providers argue there would also be more opportunity for a marketplace-set rate on their content rather than a government-set blanket license they argue is artificially low.

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GAO said that satellite, cable and noncommercial station operators raised concerns that phasing out the license would decrease access to programming.

Satellite operators, and one cable operator, also said that if the distant signal license were phased out, there might be no marketplace alternative since it was not in a commercial broadcast network's interest to allow its affiliate signals to be delivered out of their home market.

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But GAO also pointed out that the top distant signal import is WGN, and that has converted to a cable channel, which mitigates the problem. But noncoms said that without the distant license, they might not be able to get the rights to import distant station programming to markets without a noncom station (that number could increase after the spectrum auction).

For the study, GAO looked at FCC cable price data from 2010 to 2014 and Copyright Office royalty data from 2014, the most recently available, reviewed relevant reports, as well as interviewing the stakeholders, which it said were picked for "their role in the video marketplace and expertise on the issue."

The FCC was provided a copy of the report, but did not weigh in on the policy implications, only making technical changes, according to GAO.

Among the eclectic group of stakeholders polled, including five OTT providers, were: Fox, Amazon, CBS, Charter, CPB, Dish, Disney (ABC), Gray, Hulu, Major League Baseball, Microsoft, NCTC, the NFL, Netflix, PBS, Sinclair, Time Warner Cable, Tribune, and Verizon.

To check out the other stakedholders and report findings, click here