Note: This blog represents my own experience and opinions. I served as President of the Association of Independent Television Stations, President of Network Distribution for Fox Broadcasting Company, President of the ABC Television Network and Executive Vice President of the Walt Disney Company. No one recruited me or compensated me to post this.

FCC Chairman-Designate Brendan Carr recently waded into the economics of the relationship between broadcast networks and local stations. In my opinion, he may be doing this in furtherance of President elect Trump‘s promised retribution against the broadcast networks.

I spent much of my career at the intersection of broadcast networks and their local station affiliates. The networks have programming to sell and the stations desire to buy that programming to enhance the profitability of their stations. It is a garden variety, free market buyer/seller relationship in which there is no role for the government.

In the analog era, there were very few local stations in most markets. That gave the stations the leverage to demand and receive compensation from the networks in return for broadcasting their programs. As more stations signed on the air and converted from analog to digital (that enabled one station to broadcast multiple channels), the leverage began to shift. The development of online streaming provided the networks with even more distribution opportunities.  And competition from those new distribution opportunities drove the shift to station’s paying networks.just like they pay every other program provider.

Stations unhappy with the affiliation terms offered by their network always have the option to switch networks or become an independent station. For example in 2002 Graham Media, unhappy with the affiliation terms offered by CBS, terminated their affiliation with that network in Jacksonville, FL. I have no knowledge of how the station fared as an independent, but Graham chose to stick with their network affiliations at all of their other stations. And, virtually every other network affiliated station in the country decided to stay with their networks, indicating that while they might prefer better economic terms, they concluded that sticking with their network was the best way to maximize station profitability. Just this week, Grey television, one of the largest owners of local television stations, renewed their affiliation with the ABC television network for 25 of their local stations. In making the announcement Gray’s President stated “These agreements recognize our ABC affiliates’ commitment to public service and will help them continue to serve their communities.”

I was appointed President of the ABC television network in 1997. The local ABC affiliate stations were making piles of money and the network was losing $240 million a year – roughly the amount the network was paying the local stations in compensation. I set out to reverse the flow of money so that stations would pay for network programming just like they paid for other programming like “Wheel of Fortune”. I was direct and honest with the affiliate board about my intentions. They argued that Disney, which had just paid a fortune to buy ABC, should be willing to operate the network at losses of hundreds of millions of dollars, because ABC owned eight of the 230 affiliates that would benefit from the existence of the network. I respectfully told them that the network losses were unsustainable and not good for the network or the affiliates.

Fisher Broadcasting was the first ABC affiliate to agree to pay the network. It did so not because of pressure from ABC, but because of competition from an another local station in its market owned by Belo Communications. Belo offered to pay ABC to be permitted to broadcast ABC programming on Belo’s second digital channel (D2).  ABC offered Fisher the opportunity to keep its ABC affiliation by matching the offer from Belo which Fisher wisely elected to do. The industry shift from networks paying stations to stations paying networks has been driven largely by the competitive marketplace forces of new stations, new channels and other distribution opportunities for the networks.

In the beginning, station payments to networks often were expressed as a percentage of retransmission consent revenue. However, today most stations pay straightforward payments for network programming unrelated to retransmission consent revenues.

In my opinion, there is absolutely no basis in the Communications Act for the FCC to be lecturing any of the parties in this commercial marketplace about economic terms. The logical extension of FCC involvement in the economics of network affiliations would lead to the agency opening offices in New York or California dictatingwhich programs to put on broadcast networks and which programs to put on streaming services or other distribution platforms – Reductio ad absurdum!