Before the Federal Communications Commission Washington, D.C. 20554
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Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Gray Television Licensee, LLC ) MB Docket No. 20-441 And Gray Media Group, Inc. ) Complainants, ) CSR-8996-C ) v. ) ) Citizens Telecom Services Company, ) LLC d/b/a Frontier Communications ) Defendant. To: Office of the Secretary Attn: Chief, Media Bureau ANSWER TO GOOD FAITH COMPLAINT Scott Friedman Bruce Beard Kelsey Rejko Cinnamon Mueller 1714 Deer Tracks Trail Suite 230 St. Louis, MO 63131 (314) 462-9000 Attorneys for Citizens Telecom Services Company, LLC d/b/a Frontier Communications January 11, 2021 TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY ............................................................................... 2 II. BACKGROUND ................................................................................................................ 4 III. FRONTIER NEGOTIATED IN GOOD FAITH – THE FACT THAT THE PARTIES DID NOT REACH AN AGREEMENT DOES NOT EQUATE TO BAD FAITH ........... 9 A. Gray’s Complaint fails to demonstrate that Frontier violated the Commission’s per se objective standards for good faith retransmission consent negotiations. ... 10 B. Gray’s Complaint fails to establish that Frontier violated the Commission’s regulations under the totality of the circumstances test. ....................................... 14 IV. DESPITE GRAY’S ATTEMPTS TO OBTAIN COMMISSION FORFEITURES, FRONTIER DID NOT VIOLATE THE COMMISSION’S NOTICE RULES ............... 15 V. CONCLUSION ................................................................................................................. 18 1 I. INTRODUCTION AND SUMMARY Pursuant to 47 C.F.R. §§ 1.2 and 76.7(b) of the Commission’s rules, Citizens Telecom Services Company, LLC d/b/a Frontier Communications (“Frontier”) responds to the allegations made in the Good Faith Complaint (“Complaint”) filed December 22, 2020 by Gray Television Licensee, LLC and Gray Media Group, Inc. (collectively, “Gray”). In its Complaint, Gray alleges that Frontier violated its duty to negotiate in good faith and its obligation to notify its customers “as soon as possible” once Frontier knew it would no longer have Gray’s consent to retransmit the stations.1 Frontier denies these and all related allegations as lacking any basis in fact or law. The simple fact is that Frontier and Gray disagree over the value of Gray’s stations. After 25 days of negotiation and three offers put forth by Frontier, any of which Gray could have accepted, Gray now cries foul because Frontier did not agree with the financial terms that Gray wanted to force on Frontier and its customers. Essentially, Gray refuses to acknowledge that Frontier decided not to accept Gray’s proposed financial terms. Instead, Gray makes unsupportable claims that Frontier’s lead negotiator “had no authority to enter into an agreement,” and that Frontier “engaged in Potemkin negotiations” and “fake offers” because Frontier “decided more than a month ago” that it would not extend its retransmission consent agreement with Gray.2 The main premise of Gray’s specious argument is based on the inaccurate assumption that Frontier removed Gray’s stations from its online channel guides several weeks before the agreement was due to expire and possibly prior to beginning 1 Gray Television Licensee, LLC and Gray Media Group, Good Faith Complaint, MB Docket No. 12-1 (filed Dec. 22, 2020) (“Gray Complaint”). 2 Gray Complaint at 4. 2 negotiations.3 To the contrary, Frontier did not update its customer-facing channel guides until shortly after the agreement had expired.4 As the Commission has stated, “disagreement over the rates, terms and conditions of retransmission consent – even fundamental disagreement – is not indicative of a lack of good faith.”5 Frontier and Gray traded emails, phone calls and multiple proposals over 25 days, and continued speaking up until the final minutes before the agreement was scheduled to expire. The fact that Gray refused to accept the offers put forth by Frontier does not make them “fake offers,” but merely “unacceptable offers.” Nonetheless, that is precisely what Gray asks the Commission to do here in claiming that the multiple offers set forth by Frontier and rejected by Gray were “fake offers.” Had Gray accepted any of Frontier’s offers at the time they were made, Gray would have discovered that the offers were not “fake” and carriage would have continued. Seemingly, Gray only claims Frontier’s offers became “fake” when Frontier rejected Gray’s final offer. This retransmission consent negotiation was no different than the hundreds of other negotiations across the cable television industry. Gray’s complaint is simply an attempt by a broadcaster to add additional leverage to the retransmission consent process – either accept our last offer or we will claim that all your offers we rejected were fake and you never meant to reach agreement. Ultimately, the parties could not reach an agreement on the value of the stations but that does not render the negotiations a façade on Frontier’s end. The Commission should deny the Complaint. 3 Gray Complaint at 8. 4 Exhibit 1, Declaration of David Zanvettor, Director, Digital Experience, Citizens Telecom Services Company. 5 Mediacom Communications Corporation v. Sinclair Broadcast Group, Inc., Memorandum Opinion and Order, 22 FCC Rcd. 35, ¶ 6 (2007) (“Mediacom/Sinclair Order”). 3 Gray tries to gain additional leverage in the negotiations by attempting to secure Commission forfeitures against Frontier by asserting that Frontier’s conduct violated the Commission’s consumer notice rules.6 Not only are these allegations irrelevant to whether Frontier negotiated with Gray in good faith, but Frontier provided notice to their customers in strict compliance with the Commission’s rules,7 as amended by the Commission’s 2020 Service Change Notification Order.8 II. BACKGROUND Frontier provides communications services to urban, suburban, and rural communities in 25 states. Frontier offers a variety of services to residential customers over its fiber-optic and copper networks, including traditional telephone, video, high-speed Internet, advanced voice, and Frontier Secure® digital protection solutions. In 2016, Frontier acquired Verizon’s wireline assets in California, Florida, and Texas (including the Tampa, Florida system) and introduced its new Vantage™ video service in several new markets, including Myrtle Beach/Charleston, South Carolina.9 In these markets, Frontier is a competitive entrant, competing for market share against the incumbent cable companies and established satellite service providers. In April of 2020, Frontier filed for Chapter 11 6 47 C.F.R. § 76.1603. 7 Id. at § 76.1603(b) (when “the change results from circumstances outside of the cable operator’s control (including failed retransmission consent . negotiations during the last 30 days of a contract) . notice shall be provided as soon as possible”). 8 Cable Service Change Notifications, Report and Order, 35 FCC Rcd. 11052 (2020) (“2020 Service Change Notification Order”). 9 See Sean Buckley, Frontier Acquires Verizon Wireline Assets in 3 States for $10.5B, FIERCE TELECOM, available at https://www.fiercetelecom.com/telecom/frontier-acquires-verizon-wireline-assets-3-states-for-10-5b (last viewed Jan. 11, 2021). 4 bankruptcy.10 Throughout the bankruptcy, Frontier has continued providing service to its customers without interruption. In May 2020, Frontier completed a sale with Ziply Fiber, selling its cable systems in Washington and Oregon.11 Today, Frontier owns and operates cable television systems in 10 states and, in total, provides video service to about 490,000 video subscribers. Frontier and Gray were parties to a retransmission consent agreement, dated October 12, 2016 and subsequently amended on June 30, 2018. Both the underlying agreement and amendment were negotiated with Raycom, which was subsequently purchased by Gray in 2019.12 The agreement, as amended, covers Frontier’s retransmission of WWSB (Sarasota, Florida ABC affiliate) on Frontier’s cable system serving the Tampa and Sarasota, Florida areas, and WMBF (Myrtle Beach, South Carolina NBC affiliate) and WCSC (Charleston, South Carolina CBS affiliate) on Frontier’s cable system serving the Myrtle Beach/Charleston, South Carolina area. Due to the small number of subscribers receiving WMBF and WCSC programming on Frontier’s Myrtle Beach system (about 300), Frontier’s economic focus during negotiations was the duplicative carriage of WWSB on its Tampa system (about 150,000 subscribers), where Frontier also retransmits WFTS, the ABC affiliate in Tampa, Florida owned by Scripps. This unique situation stems from the Tampa, Florida designated market area (“DMA”) having two ABC-affiliated stations – WWSB and WFTS. Importantly, Frontier is permitted to air all programming (including national ABC programming) on WFTS in Sarasota 10 See Edward Gately, Frontier Communications Files Chapter 11 Bankruptcy, CHANNEL PARTNERS, available at https://www.channelpartnersonline.com/2020/04/15/frontier-communications-files-chapter-11-bankruptcy/ (last viewed Jan. 11, 2021). 11 See Seattle Times staff, Frontier to finalize $1.35 billion sale of Northwest assets to Kirkland-based Ziply Fiber, SEATTLE TIMES, available at https://www.seattletimes.com/business/frontier-to-finalize-1-35-billion-sale-of- northwest-assets-to-kirkland-based-ziply-fiber/ (last viewed Jan. 11, 2021). 12 See John Lafayette, Gray Completes Acquisition of Raycom Media, BROADCASTING+CABLE, available at https://www.nexttv.com/news/gray-completes-acquisition-of-raycom-media