Many entities are involved in the production and distribution of television content to households, as shown in figure 1. Local television stations may acquire network content from the national broadcast networks that they are affiliated with, such as CBS; from syndicators for syndicated content, such as game shows and reruns; or from both. Stations also create their own content, including local news. Stations provide content to households directly through over the air transmission, which households can receive free of charge, and through retransmission by MVPDs, such as cable and satellite operators. Content producers, such as Sony and Disney, also distribute content through cable networks, such as ESPN, that are carried by MVPDs. “Over-the-top” providers, such as Netflix, provide content to consumers through Internet connections often provided by MVPDs. According to FCC, local television stations’ affiliation agreements with networks and contracts with syndicators generally grant a station the right to be the exclusive provider of that network’s or syndicator’s content in the station’s local market. Broadcasting industry stakeholders and economic theory note that exclusive territories can provide economic benefits to local television stations, broadcast networks, and viewers. Local television stations benefit from being the exclusive providers in their markets of high-demand network content, such as professional sports and primetime dramas. Being the exclusive provider supports stations’ viewership levels, which strengthens their revenues, allowing them to invest in the production of local content, among other things. For broadcast networks, exclusivity can help increase the value of each local station and create efficiencies in the distribution of network content. Thus, while exclusive territories reduce competition between some stations (e.g., local NBC stations in different geographic markets do not compete), the exclusive territories could provide incentives for stations to invest more heavily in the development of content and thus promote greater competition between stations in the same geographic market (e.g., local ABC and NBC stations in the same market compete), which can benefit viewers. FCC’s exclusivity rules are an administrative mechanism for local television stations to enforce their exclusive rights obtained through contracts with broadcast networks and syndicators. Network non-duplication. This rule protects a local television station’s right to be the exclusive provider of network content in its market. FCC promulgated the rule in 1966 to protect local television stations from competition from cable operators that might retransmit the signals of stations from distant markets. FCC was concerned that the ability of cable operators to import the signals of stations in distant markets into a local market was unfair to local television stations with exclusive contractual rights to air network content in their local market. The rule allows exclusivity within the area of geographic protection agreed to by the network and the station, so long as that region is within a radius of 35 miles—for large markets—or 55 miles—for small markets—from the station (see fig. 2). Syndicated exclusivity. This rule protects a local television station’s right to be the exclusive provider of syndicated content in its market. FCC first promulgated the rule in 1972 to protect local television stations and ensure the continued supply of content. This rule applies within an area of geographic protection agreed to by the syndicator and the station, so long as that region is within a 35-mile radius from the station. The exclusivity rules—when invoked by local television stations—require cable operators to block duplicative content carried on a distant signal imported into the station’s protected area by cable operators. For example, these rules allow WJZ, the CBS-affiliated local television station in Baltimore, to prohibit a cable operator from showing duplicative network content on another market’s CBS station that the cable operator imports into Baltimore. Similarly, the rules allow WJZ to prohibit a cable operator from showing any duplicated syndicated content on any other market’s station the cable operator imports into Baltimore. Local television stations are able to invoke the exclusivity rules regardless of whether their signals are retransmitted by a cable operator or not. For example, even if WJZ is not retransmitted by a particular cable operator in Baltimore, WJZ can invoke its exclusivity rights against that cable operator, requiring it to block duplicative content. FCC has statutory authority to administratively review complaints of violation of these rules (e.g., if a local television station believes a cable operator imported a distant signal into its market even though the station invoked its exclusivity protections) when such complaints are formally brought before the Commission. FCC officials said that the Commission addresses such complaints on a case-by-case basis. The broadcast industry is governed by a number of other rules and statutes that interplay with the exclusivity rules. These rules and laws include the following: Must carry. Must carry refers to the right of a local television station to require that cable operators that serve households in the station’s market retransmit its signal in that local market. The choice to invoke must carry is made every 3 years by stations. Cable operators carrying stations under the must-carry rule may not accept or request any fee in exchange for coverage. Retransmission consent. Retransmission consent refers to permission given by television stations who do not choose must carry to allow a cable or satellite operator to retransmit their signals. Stations invoke either retransmission consent or must carry. Retransmission consent was enacted in 1992; at the time, Congress determined that cable operators obtained great benefit from the broadcast signals that they were able to carry without broadcaster consent, which resulted in an effective subsidy to cable operators. Retransmission rights are negotiated directly between a local television station and cable and satellite operators. By opting for retransmission consent, stations give up the guarantee that cable and satellite operators will carry their signal under must carry in exchange for the right to negotiate compensation for their retransmission. Cable and satellite operators are unable to retransmit the signal of a local television station that has chosen retransmission consent without its permission. If, despite negotiations, a local television station and a cable or satellite operator do not reach agreement, the local television station may prohibit the cable or satellite operator from retransmitting its signal, commonly referred to as a “blackout.” FCC rules require local television stations and cable or satellite operators to negotiate for retransmission consent in “good faith.” FCC’s rules set a number of good faith standards, including a requirement that parties designate an individual with decision-making power to lead negotiations. Compulsory copyright. Must carry and retransmission consent pertain to the retransmission of a local television station’s signal. The content within that signal is protected by copyright. For example, the National Football League (NFL) holds the copyright for its games that are broadcast on CBS, Fox, and NBC. Generally, any potential user (other than the copyright holder) intending to transmit copyright protected content must obtain permission from the copyright holder beforehand. The compulsory copyright licenses, enacted in 1976, allow cable operators to retransmit all content on a local television station without negotiating with the copyright holders. To make use of the compulsory copyright, the cable operator must follow relevant FCC rules and pay royalties to the Copyright Office within the Library of Congress. The Copyright Act establishes the royalties that a cable operator must pay to carry television stations’ signals. A cable operator pays a minimum royalty fee regardless of the number of local or distant television station signals it carries, and the royalties for local signals are less than those for distant signals. Compensation for television content flows through industry participants in a number of ways that are relevant to the exclusivity rules, as seen in figure 3. Households that subscribe to television service with an MVPD pay subscription fees; FCC reported that the average monthly fee for expanded-basic service was $64.41 on January 1, 2013. Those MVPDs, including cable and satellite operators, pay retransmission consent fees to local television stations that opt for retransmission consent; as discussed above, the fees are determined in negotiations between stations and MVPDs. Advertisers purchase time from local television stations, broadcast networks, and MVPDs. Local television stations provide compensation to their affiliated national broadcast networks and to the providers of syndicated content in exchange for the rights to be the exclusive provider of that content in their market. Local television stations also use their advertising and retransmission consent revenues to develop their own content, including local news. In 2014, FCC issued a FNPRM to consider eliminating or modifying the exclusivity rules, in part to determine if the rules are still needed given changes to the video marketplace since the rules were first promulgated. FCC asked for comments on, among other things, the potential effects of eliminating the rules. In response to the FNPRM, FCC received 72 records during the open comment period, including letters from individuals, and comments and reply comments from industry stakeholders. FCC officials said that the Media Bureau is working on a recommendation for the FCC Chairman’s consideration on whether to repeal or modify the exclusivity rules; there is no firm timeframe for when the bureau may make a recommendation. All 13 broadcast industry stakeholders (local television stations, national broadcast networks, and relevant industry associations) we interviewed and whose comments to FCC we reviewed report that the exclusivity rules are needed to help protect stations’ exclusive contractual rights to air network and syndicated content in their markets. Those stakeholders reported that the rules provide an efficient enforcement mechanism to protect the exclusivity that local television stations negotiate for and obtain in agreements with networks and syndicators; in the absence of the rules, enforcement of exclusivity would have to take place in the courts, which would be difficult and inefficient for several reasons. These stakeholders report that if a local television station believes that a cable operator improperly imported duplicative content on a distant signal into its market, the station will be unable to bring legal action to stop the airing of this duplicative content.