Can Cable Offer TV Stations a La Carte as DirecTV Wants from TEGNA?

Dec 02, 2023

By Ted Hearn, Editor of Policyband 

Washington, D.C., Dec. 2, 2023 – DirecTV is looking to establish a new regime for the distribution of local TV stations, one it says would arrest the tide of TV station-caused price hikes and consumer anger over blackouts before the big game.

The satellite TV provider with 11.8 million subscribers nationally is proposing a new a la carte model for the industry. The company wants to jettison the “retransmission consent” requirement in current law that says DirecTV must negotiate carriage with TV stations, even if it means losing stations in the absence of a mutual deal.

DirecTV apparently wouldn’t face any legal obstacles in moving ahead if it could secure broadcasters’ cooperation. But cable TV operators would likely need a new law or a Federal Communications Commission open to some creative interpretations of existing cable law to follow in DirecTV’s path.

DirecTV advanced its a la carte proposal soon after TEGNA pulled 66 network stations in 52 metro regions, by the satellite carrier’s count, on Thursday night. The blackout arrived after the two sides couldn’t agree on a new contract and just two days before the playing of the major college football conference championship games.

Under DirecTV's a la carte plan, TV stations could set their own retail prices, allowing consumers to tailor their local TV station lineup as they see fit in lieu of a channel package or programming tier sold on a take-it-or-leave basis. DirecTV consumers presumably would no longer need to fear TV station blackouts triggered by a clash of media giants.

DirecTV and Dish gained the legal right to offer local TV stations in their local markets under a federal law passed in 1999. In implementing the law, the FCC concluded that “Congress did not intend to establish a basic service tier-type requirement for satellite carriers when it implemented the satellite must-carry rules, and that Congress did not explicitly prohibit the sale of local television station signals on an a la carte basis,” according to the Davis Wright Tremaine law firm.

The 1999 law did require Dish and DirecTV to comply with a must carry requirement that said if they carry even one local TV station in a market, they needed to carry all of them. This carriage mandate approach survived judicial review.

Meanwhile, cable TV operators’ carriage of local TV stations is governed by the 1992 Cable Act. The FCC’s website suggests that cable TV operators could not lawfully provide local TV stations a la carte.

In a 2019 update, the FCC said cable TV operators are “generally required to offer a ‘basic tier’ of programming to all subscribers before they purchase additional programming.” The basic tier, the agency explained, includes “at a minimum” local TV stations and public access channels.

The legal problem for cable seems to be that offering some or all local TV stations a la carte would conflict with the requirement to offer a basic tier with its minimum attributes.

Cable could have a slight chance at the FCC if cable system owners got as revved up about a la carte as DirecTV seems to be.

In 2015, the FCC held that every cable TV system in the country is subject to “effective competition,” meaning local governments lost their authority to set the price of the basic tier. The FCC suggested that a finding of effective competition could result in the elimination of cable’s basic tier requirement – the obstacle in the way of a la carte on cable. The agency declined to address that statutory interpretation then and has not done so since.

Capitol Hill's interest in cable a la carte peaked about a decade ago.

Perhaps in an effort to steer cable away from its legal dead end at the FCC, Sen. John Thune (R-S.D.) and then-Sen. Jay Rockefeller (D-W.Va.) co-sponsored legislation in 2014 that would have required local TV stations to provide a la carte access to their TV stations on cable systems. In addition to abolishing retransmission consent, the Thune-Rockefeller bill would have allowed TV stations to set the a la carte price and keep all the revenue.

The National Association of Broadcasters (NAB) attacked the Senators’ bill, saying it “proposes a broadcast a la carte scheme that will lead to higher prices and less program diversity.” At the time, TV station retransmission consent revenue was about $4.8 billion annually. It has since climbed to nearly $15 billion.

Although Thune and Rockefeller thought about adding their bill as an amendment to a must-pass communications bill that year, they decided against it in the end, saying, “It was too big and bold …  We are pleased that we were able to start a conversation about the proposal, a conversation which we intend to continue.”