Before the Federal Communications Commission Washington, D.C. 20554

) In the Matter of ) ) Amendment of the Commission’s ) MB Docket No. 10-71 Rules Related to Retransmission ) Consent ) )

COMMENTS OF BLOCK COMMUNICATIONS, INC. (“BCI”)

I. Introduction and Summary.

As both a broadcaster and smaller cable operator, BCI calls on the Commission to take firm action to reign in anticompetitive, anticonsumer conduct now proliferating the retransmission consent environment. As some broadcasters maneuver to squeeze out competing stations solely to gain retransmission consent leverage, and as some national networks demand a major cut of retransmission consent revenues from affiliates, consumers are losing on all fronts, facing sharply higher basic cable costs, while losing access to adjacent market stations, in many cases, stations available on cable for decades.

No marketplace forces constrain this conduct, and the consumer harm is manifest. The

Commission must step in as the “cop on the beat.”

If the Commission fails to take firm action, major cost increases and service disruptions will result. Consumers will face steep basic cable rate increases in 2012 and beyond, just to cover new retransmission consent fees. Consumers will also contend with significant disruptions in viewing patterns, as broadcasters and networks cut off cable carriage of more adjacent market stations. The Commission has authority to prevent these harms; and it must act to do so.

We make clear at the outset: BCI vigorously supports free, over-the-air broadcasting.

“The national over-the-air television broadcast system is an American triumph.”1 But, in the

current retransmission consent environment, certain powerful broadcasters and networks are

manipulating the system in blatantly anti-competitive ways, all to extract ever-increasing fees

from consumers. That conduct is contrary to the public interest, and the Commission must

address it.

These comments describe the following three areas of anticompetitive, anticonsumer

retransmission consent conduct requiring Commission intervention:

 Broadcaster attacks on the significantly viewed status of adjacent market stations solely to gain leverage in retransmission consent negotiations;

 Broadcasters and networks preventing distribution of adjacent market stations, even in communities within the adjacent market station’s noise limited service contour, solely to gain leverage in retransmission consent negotiations;

 National broadcast networks’ demands for a major “cut” of retransmission consent revenues from affiliates.

We also describe why the Commission should harmonize the syndicated exclusivity and

network nonduplication rules by adopting a Grade B/noise limited service contour exception for

network nonduplication. This will aid in limiting the ability of in-market broadcasters to require

cable systems to black out competing programming that is readily available over-the-air.

1 See, e.g., In the Matter of Innovation in the Broadcast Television Bands: Allocations, Channel Sharing and Improvements to VHF, ET Docket No. 10-235, Comments of Block Communications, Inc. et al, at 6 (filed Mar. 18, 2011). 2

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

Block Communications, Inc. BCI is a privately-held, family-owned media and

communications company headquartered in Toledo, Ohio. BCI is owned by the Block family,

which has been in the media business for over 100 years. BCI’s operations include television broadcasting, newspaper publishing, cable television, high-speed Internet access, and telecommunications services. BCI’s media and communications businesses include five smaller market television stations, two cable systems, two newspapers, and a telephone company.

BCI acquired broadcast stations WLIO (Lima, Ohio) in 1972, WDRB (Louisville,

Kentucky) in 1984, KTRV (Boise, Idaho) in 1985, WAND (Decatur, Illinois) in 2000, and

WMYO-TV (Salem, Indiana) in 2001. BCI built its first cable system in 1965 in Toledo, Ohio, and acquired the cable system serving Sandusky, Ohio, in 1981.

II. The Commission must act to reign in the anti-competitive, anti-consumer conduct proliferating the current retransmission consent environment.

As a broadcaster and cable operator, BCI sees with disturbing clarity the looming retransmission consent crisis. Absent Commission intervention before the upcoming retransmission consent round, the conduct of certain broadcasters and networks will propel major basic cable rate increases in 2012, easily ranging between $3.00 and $5.00 per month, just to cover new retransmission consent fees. At the same time, consumers will suffer significant disruption in established viewing patterns, as broadcasters and networks force cable operators to pull more signals.

Many of the developments we discuss here are new, and were either not present or not significant in previous rounds. To avert widespread consumer harm, the Commission must dig beneath the rhetoric and learn how powerful broadcasters and networks are manipulating 3

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

retransmission consent. We discuss below recent retransmission consent developments requiring

near-term Commission intervention and propose specific action the Commission should take.

A. The Commission must stop broadcasters’ attacks on the significantly viewed status of adjacent market stations solely to gain retransmission consent leverage.

In the past three years, certain broadcasters have initiated Commission proceedings to have stations taken off the Commission’s significantly viewed list.2 In nearly all cases, the

petitions targeted adjacent market stations that have had significantly viewed status for years and

that have been carried for years on cable systems in the petitioning station’s DMA. There is one

reason, and only one reason, for an in-market station to attack the decades-old significantly

viewed status of another station: To block a competitor so as to gain retransmission consent

leverage and extract higher fees.

Significantly viewed status is an exception to cable black out obligations under the

network nonduplication and syndicated exclusivity regulations.3 As some broadcasters have

pushed for major increases in retransmission consent fees, their strategies have been frustrated by

competition – the cable system having access to a significantly viewed station affiliated with the

same network. Certain broadcasters have responded to this situation by using regulatory

2 See, e.g, In the Matter of WPBF-TV Company Petition for Waiver of Sections 76.92(f) and 76.106(a) of the Commission’s Rules, Memorandum Opinion and Order, 25 FCC Rcd 9102 (2010); In the Matter of WGME Licensee, LLC Petition for Waiver of Section 76.92(f) of the Commission’s Rules, Order on Reconsideration, 25 FCC Rcd 13520 (2010); In the Matter of Centex Television Limited Partnership Petition for Waiver of Section 76.92(f) of the Commission’s Rules, Order on Reconsideration, 25 FCC Rcd 13526 (2010); In the Matter of WyoMedia Corporation Petition for Waiver of Sections 76.92(f) and 76.106(a) of the Commission’s Rules, Memorandum Opinion and Order, 26 FCC Rcd 3770 (2011); In the Matter of WISN Hearst-Argyle Television, Inc. Petition for Waiver of Sections 76.92(f) and 76.105(a) of the Commission’s Rules, Memorandum Opinion and Order, DA 11- 539, CSR-7764-N (rel. Mar. 23, 2011). 3 47 C.F.R. § 76.92(f) (network nonduplication); 47 C.F.R. § 76.106(a) (syndicated exclusivity). 4

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

proceedings to eliminate the competition. Predictably, higher retransmission consent fees and

higher costs for consumers follow.

BCI has first-hand experience with this conduct. Two broadcast stations in Toledo

sought waivers of the significantly viewed status of two Detroit television carried on BCI’s

Toledo cable system.4 The two Detroit stations at issue could be received over-the-air in Toledo,

had been “significantly viewed” in the City of Toledo for more than 40 years, and have been

carried on BCI’s cable system for nearly as long. After decades of this harmonious status quo,

the Toledo stations suddenly challenged the Detroit stations’ significantly viewed status.5 The only explanation: The stations aimed to eliminate competitors, gain leverage, and extract higher

retransmission consent fees from BCI and its customers.

The significantly viewed cases demonstrate broadcasters’ increasing actions to eliminate

competitors, drive up retransmission consent fees, and, in many cases, disrupt long-established

viewing patterns. The Commission should not tolerate this anticompetitive, anticonsumer

conduct by broadcast licensees.

4 The two Toledo stations sought network nonduplication exclusivity for only those cable subscribers in the City of Toledo. The Toledo stations could not gain access to diaries collected by The Nielsen Company to establish a loss of significant viewership in the other communities of Lucas County, Ohio served by BCI’s cable system. See In the Matter of WTVG, Inc. Petition For Waiver of Section 76.92(f) of the Commission's Rules, Memorandum Opinion and Order, 25 FCC Rcd 2665 (MB 2010); In the Matter of WUPW Broadcasting, LLC Petition For Waiver of Section 76.92(f) of the Commission's Rules, Memorandum Opinion and Order, 25 FCC Rcd 2678 (MB 2010) (“Media Bureau Orders”). 5 Applications for Review seeking full Commission review of the Media Bureau Orders have been filed with the Commission. See In the Matter of WTVG, Inc. and WUPW Broadcasting, LLC Petitions for Waiver of Section 76.92(f) of the Commission’s Rules, Order, 25 FCC Rcd 12263, 12263, ¶ 1 (2010) (“Buckeye has filed…Applications for Review in response to [the Media Bureau Orders]”). 5

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

Proposed Commission action to address the problem. The overriding policy that should guide the Commission is maximizing distribution of broadcast stations within their service areas. The Commission should stop granting significantly viewed petitions filed by in- market stations unless the petitioner demonstrates: (i) the petition is not filed for purposes of reducing competition in counties where the station is significantly viewed; and (ii) retransmission consent agreements are in place with all affected MVPDs with remaining terms of at least six years.

The Commission should also revise its regulations to prohibit any broadcaster or network from taking action that has the effect of preventing a station or MVPD from agreeing to retransmission consent in a county where a station is significantly viewed.

These actions would help constrain the blatantly anticompetitive use of the Commission’s significantly viewed petition process.

The Commission should also limit use of Nielson surveys and diaries. BCI is also concerned with the Commission’s use of Nielsen viewership surveys and diaries to determine the significantly viewed status of an out-of-market station. The Nielsen diaries were not designed for this purpose. In smaller markets especially, Nielsen diaries are highly suspect. Sample sizes are miniscule, lacking reliability, and logging practices result in viewing data of questionable accuracy. The use of this data presents a real risk of incorrect decisions in significantly viewed cases. The Commission should require petitioners to put forth more credible evidence to support claims of lack of viewership.

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

B. The Commission must stop broadcasters and networks from blocking distribution of adjacent market stations in communities within a station’s service contour.

As with the anticompetitive use of the significantly viewed process, certain broadcasters

and networks employ a similar strategy to prevent cable carriage of adjacent market stations,

even in communities within the station’s service contour.6 Essentially, broadcasters and

networks use Nielsen DMA boundaries, arbitrarily drawn at county lines, to restrict distribution

of stations that originate from the other side of that arbitrary line, even when the station’s service

contour extends into the county. Again, this conduct has emerged only recently as a tactic to

block a competitor and gain leverage to raise retransmission consent fees. In essence, this

represents private parties restricting a station’s service area to less than authorized by the FCC,

solely for anticompetitive purposes.

While BCI strongly supports free over-the-air broadcasting and broadcasters’ rights in their spectrum, broadcasters should not be insulated from competition in an area where another station’s signal is available over-the-air.

A prime example of this is WAND, the BCI-owned station in Decatur, Illinois

(Champaign & Springfield-Decatur DMA). As shown on the DTV coverage map on the page 8,7

WAND’s noise limited service contour extends outside of the station’s DMA, well into Tazewell and McClean counties, including the City of Bloomington, and beyond. But for many stations

6 Formerly, a station’s predicted Grade B contour, now, for DTV signals, a station’s noise limited service contour.

7 Also available at http://transition.fcc.gov/dtv/markets/maps_current/Champaign-Springfield-Decatur_IL.pdf (last visited May 27, 2011).

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011 like WAND, the anti-competitive use of network nonduplication and restrictions on out-of- market retransmission consent imposed by networks block cable distribution in significant portions of a station’s noise limited service contour. The result: Artificial reduction in a station’s distribution, loss of competition, and higher retransmission consent fees.

Proposed Commission action to address the problem. The same overriding policy should guide the Commission here: The Commission should act to support maximizing distribution of broadcast stations in their service areas. The Commission should revise its regulations to prohibit any broadcaster or network from restricting in any way the ability of a station to grant retransmission consent within the station’s noise limited service contour.

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

C. The Commission must stop national networks from extracting a “cut” of retransmission consent revenues from affiliates.

To protect consumers from major increases in basic cable costs in January 2012 (and

each year after that), the Commission must stop another recent and disturbing retransmission

consent development – networks demanding a major cut of affiliate retransmission consent

revenue. The national broadcast networks reportedly seek a share of affiliates’ retransmission

consent revenue either through a flat “license fee” or through a percentage of the retransmission consent revenues. Ample press and public statements verify this fundamental shift.

Affiliates are “paying the price,” one way or another. One BCI station recently lost a major network affiliation over a network’s new demands for a significant portion of station revenue, all tied expressly or implicitly to retransmission consent fees.

In adopting the retransmission consent laws, Congress made clear that it intended to create a market for local station’s retransmission consent rights, preserving the right for local stations to receive consideration. Retransmission consent was to preserve “the system of free, universally available, local broadcasting. . .”8 The Commission too has recognized one of the principal goals of retransmission consent is “to help preserve local broadcast service to the public.”9 This certainly extends to the networks when exercising retransmission consent rights

for their O&O stations. But retransmission consent was never intended as a national network

gravy train, transferring billions from local consumers to the national networks. Moreover, the

8 S. Rep. No 102-92 at 55-56, 102nd Cong., 2d Sess. (1992).

9 Implementation of the Cable Television Consumer Protection and Competition Act of 1992, Memorandum Opinion and Order, 9 FCC Rcd 6732 (1994) at ¶ 104.

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

networks demands for retransmission consent-related compensation will have the perverse effect

of hurting stations’ ability to produce local programming, as station revenue siphoned off by distant network headquarters instead of invested in quality local programming. Given the intense

pressure on basic cable rates resulting from network demands on affiliates, and given the harm to

local affiliates’ and their programming efforts, to protect consumers and localism, the

Commission must intervene.

Networks already benefit from substantial syndication fees following the repeal of

the fin/syn rules. The networks exploitation of retransmission consent brings us back to another time the networks appealed for an additional revenue stream. Over 15 years ago, after the networks argue the need for additional revenue, the Commission’s repealed its financial interest and syndication (“fin/syn”) regulations, expanding the networks ability to own and syndicate programming.10 Broadcast networks generate a major revenue stream from the syndication of

popular television programming, and many of the syndication agreements require the purchaser

to continue paying for the program as long as the program is in original production. This repeal

of the fin/syn rules has increased the market power of networks over affiliates, market power

networks now use to exploit retransmission consent. The Commission cannot stand idle while the networks now use this power to insert themselves into affiliates’ retransmission consent business, in ways that are manifestly anti-consumer.

Proposed Commission action to address the problem. The Commission should make clear that the retransmission consent process should result in mutually beneficial carriage

10 In the matter of Evaluation of the Syndication and Financial Interest Rules, Second Report and Order, 8 FCC Rcd 3282 (1993). 10

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

arrangements between local broadcast stations and MVPDs. To the extent those arrangements

include compensation to the broadcaster, the Commission should prohibit any action by a

national network that has the effect of increasing retransmission consent fees affiliates charge.

D. The Commission must harmonize its cable exclusivity rules to include a Grade B/ noise limited service contour exception to network nonduplication, as it currently exists for syndicated exclusivity.

In conjunction with this proceeding, the Commission should harmonize the cable

exclusivity rules and include a Grade B/noise limited service contour exception for cable

network nonduplication. This is germane to retransmission consent because, as a tactic to

increase retransmission consent fees, some broadcasters are asserting network nonduplication in

communities that have traditionally carried a nearby out-of-market station also available over-

the-air as evidenced by the station’s service contour. It is nonsensical that a cable operator must

black out network programming from the nearby out-of-market station, while syndicated

programming from the same station benefits from a service contour exception.11 Again, this has become part of a broader campaign by some broadcasters to interfere with long-established distribution arrangements and viewing patterns solely to increase leverage in retransmission consent negotiations.

The Commission should harmonize the cable network nonduplication and syndicated exclusivity rules so they both include a Grade B/noise limited service contour exception. The

Commission articulated the policy underlying its cable network nonduplication rules as

“reproduc[ing] in cable households the same ability to view network programming that noncable

11 47 C.F.R. § 76.106 (a). 11

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

subscribers in the same locality have.”12 Giving broadcasters the ability to block cable

customers from receiving programming available over-the-air squarely conflicts with this policy,

and provides another anticompetitive tool for raising retransmission consent fees and disrupting consumers’ viewing patterns.

Proposed Commission action to address the problem. The Commission should

include in the network nonduplication regulations a black out exception for cable communities

within a station’s Grade B/noise limited service contour.13

E. The Commission has authority to constrain anti-competitive and anticonsumer retransmission consent conduct.

The Commission has broad statutory authority to adopt rules governing retransmission

consent, and to address the problems described above. Section 325(b)(3)(A) of the Cable Act

instructs the Commission to establish regulations “to govern the exercise by television broadcast

stations of the right to grant retransmission consent….”14 Congress expressly gave the

Commission broad authority to adopt rules that protect the public interest as it relates to

broadcasters’ grant of retransmission consent rights to MVPDs. Section 325(b)(3)(A) further

instructs the Commission to consider “the impact that the grant of retransmission consent by

12 Teleprompter of Quincy, Memorandum Opinion and Order, 83 F.C.C.2d 431 ¶14 (F.C.C. 1980) (citing In re Amendment of Subpart F of Part 76 of the Commission’s Rules and Regulations with Respect to Network Program Exclusivity Protection by Cable Television Sys., Memorandum Opinion and Order, 67 F.C.C.2d 1303, 1305 (F.C.C. 1978); In re Application of American Television and Commc’ns Corp., Memorandum Opinion and Order, 47 F.C.C.2d 211 (F.C.C. 1974); In re Amendment of Part 74, Subpart K, of the Commission’s Rules and Regulations Relative to Cmty. Antenna Television Sys., Cable Television Report and Order, 36 F.C.C.2d 143, 181 (F.C.C. 1972); 1965 Report and Order at 720). 13 The Commission has an open, but long dormant, docket on this issue. In the Matter of Amendment of Parts 73 and 76 of the Commission's Rules Relating to Program Exclusivity in the Cable and Broadcast Industries, Further Notice of Proposed Rulemaking, 3 FCC Rcd 6171, (1988).

14 47 U.S.C. § 325(b)(3)(A). 12

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011 television stations may have on the rates for the basic service tier…,” and to make sure its rules are not inconsistent with its obligation “to ensure that the rates for the basic service tier are reasonable.”15 This provides the Commission with clear statutory authority to address anticompetitive retransmission consent conduct leading to drastically higher fees.

As the Commission recently observed in its Open Internet Order,16 the Commission has broad authority to act to ensure the “orderly development of local television broadcasting,”17 including “authority to allocate broadcasting zones or areas and to promulgate regulations ‘as it may deem necessary’ to prevent interference among stations,” 18 and the duty to “generally encourage the larger and more effective use of radio in the public interest.”19 From this, there can be no serious challenge to the Commission’s authority under Title III to prohibit conduct by broadcasters and networks that has the effect of restricting distribution of a broadcast signal, including via retransmission consent, where the station is significantly viewed or within the station’s authorized service contour.

15 Id. 16 Preserving the Open Internet, GN Docket No. 09-191, Report and Order, 25 FCC Rcd 17905, ¶ 128 (2010) (“Open Internet Order”).

17 Id. (citing United States v. Sw. Cable Co., 392 U.S. 157, 177 (1968)).

18 Id. at n.402 (citing 47 U.S.C. § 303(f) & (h)).

19 Id. at n.403 (citing 47 U.S.C. § 303(g)).

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

Based on the above authority, the Commission should amend its regulations as follows:

 Prohibit any broadcaster or network from taking any action that has the effect of restricting a broadcaster’s ability to grant retransmission consent in an area where a station is significantly viewed.

 Prohibit any broadcaster or network from taking any action that has the effect of restricting a broadcaster’s ability to grant retransmission consent within the station’s noise limited service contour.

 Prohibit any broadcast network from taking any action that has the effect of requiring local affiliates to increases fees for retransmission consent.

 Establish the same Grade B/noise limited service contour exception for network nonduplication as now exists for syndicated exclusivity.

 Require a broadcaster seeking a waiver of a competing station’s significantly viewed status to: (i) demonstrate that the petition is not filed for the purposes of reducing competition; and (ii) show that the petitioner has retransmission consent agreements in place with affected MVPDs for at least six more years.

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011

III. Conclusion.

As a broadcaster and cable operator, BCI is uniquely positioned to warn the Commission of the upcoming retransmission consent crisis. To avert steep increases in basic cable rates and disruption of long-established viewing patterns affecting millions of consumers, the Commission must take firm action to constrain the anticompetitive and anticonsumer conduct described in these comments.

Respectfully submitted,

By:

Christopher C. Cinnamon Jeremy M. Kissel Cinnamon Mueller 307 North Michigan Avenue Suite 1020 Chicago, Illinois 60601 (312) 372-3930

Attorneys for Block Communications, Inc.

May 27, 2011

Block Communications, Inc. Comments MB Docket No. 10-71 May 27, 2011