At its September 29, 2016 open meeting, the FCC adopted rules to make it easier for broadcasters to seek approval for foreign ownership, reformed the methodology for publicly traded broadcasters and common carriers to assess compliance with the statutory foreign ownership limits, and proposed rules it believes will strengthen the position of independent programmers in negotiations with multichannel video programming distributors (MVPDs). The Commission tabled the most anticipated item on its agenda, however, delaying the adoption of rules requiring MVPDs to offer apps as a substitute for set top boxes.
- Foreign Ownership: Section 310(b)(4) of the Communications Act caps at 25 percent the amount of indirect foreign investment in a U.S. broadcast, common carrier, or aeronautical fixed or en route radio licensee without obtaining FCC approval. According to an FCC-issued fact sheet, under the new rules adopted by the Commission, broadcast licensees may follow a streamlined procedure to request approval for: (1) up to 100 percent foreign ownership of its controlling U.S. parent; (2) a controlling foreign investor to increase its equity and/or voting interests in the U.S. parent up to and including 100 percent at some future time without filing a new petition; and (3) a non-controlling foreign investor to increase its equity and/or voting interests in the U.S. parent at some future time, up to and including a non-controlling 49.99 percent equity and/or voting interest. Broadcast petitioners will need to seek specific approval of foreign individuals or entities with a greater than 5 percent ownership interest (or, in certain situations, an interest greater than 10 percent). The new rules also provide a framework for publicly traded broadcast and common carrier licensees or their controlling U.S. parents to ascertain their foreign ownership using information that is “known or reasonably should be known” to the company in the ordinary course of business.
- Independent Programming: In its Notice of Proposed Rulemaking, the FCC proposed to prohibit the use of so-called “unconditional” most favored nation (MFN) and “unreasonable” alternative distribution method (ADM) clauses in contracts between MVPDs and independent programmers. An “unconditional” MFN clause entitles a pay TV provider to receive favorable contract terms that a programmer has given to another programming distributor, without requiring the pay TV provider to assume any corresponding obligations from the other distribution agreement. An ADM clause generally prohibits or limits a programmer from putting its programming on alternative video distribution platforms, such as online platforms. In a fact sheet, the FCC said that the proposed rules “would help to remove these barriers to competition, diversity, and innovation in the video marketplace, giving independent and niche programmers greater ability to reach their intended audiences.” Comments will be due 60 days after the NPRM is published in the Federal Register.
- Set Top Boxes: At the start of the FCC’s Open Meeting, the Secretary announced that the set top box item had been deleted from the agenda. In a joint statement, the three Democratic Commissioners–Chairman Tom Wheeler, Mignon Clyburn, and Jessica Rosenworcel–stated that they remain “committed to unlocking the set-top box.” The statement confirmed that the item will remain “on circulation,” meaning that the Commissioners can vote on the item at any time and that the “sunshine period” prohibition on communications remains in place. The Democratic Commissioners said that they are “working to resolve the remaining technical and legal issues.” After the meeting, Chairman Wheeler said that the Commissioners were making progress, but just “ran out of time.”