CBS, TWC Retrans Dispute Results in Over-the-Air, Online Blackout

A retransmission consent dispute between Time Warner Cable and CBS resulted in a blackout of CBS programming to TWC subscribers in the New York, Los Angeles and Dallas markets. The companies’ last agreed-upon deadline extension expired at 5 p.m. Friday (CD July 31 p15). TWC subscribers also are blocked from accessing programming online.

The companies are still maintaining contact with the FCC on the issue, said agency officials. TWC and CBS seem to be sending updates to the commissioners’ offices about the latest developments, an FCC official said. The commission actively monitors these disputes and urges the parties to return to the negotiating table and reach a mutually agreeable contract that returns the signals to the cable lineup, an FCC spokeswoman said. The FCC can’t force the parties to reach an agreement, she said. CBS and TWC didn’t say whether they plan to file retrans complaints. The dropped channels include CBS-owned pay-TV channels, like Showtime and The Movie Channel.

Representatives of CBS and Time Warner Cable had told some FCC officials of the looming retrans dispute, before the blackout occurred, said an agency official. High-profile blackouts such as this may make the commission more inclined to revise retrans rules, predicted a broadcast executive before the blackout. But any order on retrans rules, if one circulated, probably wouldn’t make wholesale changes, the executive predicted.

TWC CEO Glenn Britt urged CBS to “resume carriage with the new economics” agreed to by TWC during negotiations. Although the terms aren’t ideal to either company, “we believe we should continue to live with them in the interest of restoring CBS immediately for the benefit of consumers,” he said Monday in a letter to CBS CEO Leslie Moonves (http://bit.ly/13fBLgB). Britt proposed that CBS could make its stations available on an a la carte basis “at a price and on terms of its choosing, with 100 percent of that price remitted to CBS.” He also urged the broadcaster to immediately stop blocking CBS.com content from TWC’s Internet customers.

TWC urged the FCC to address the current retrans consent model. CBS’s “aggressive” tactics not only are causing significant harm to TWC’s subscribers, “but also powerfully underscore the flaws of the retransmission consent regime,” said the cable operator in an ex parte filing (http://bit.ly/150CiSU). TWC called CBS’s online ban “anti-consumer.” Such blocking “represents the antithesis of acting in the public interest and flies in the face of Congress’s goals in enacting the retransmission consent regime,” it said. CBS purported to offer a smaller programming package, but “still sought to bundle CBS with Showtime, and ... was clearly a sham designed to whitewash CBS’s coercive conduct, as it would have required TWC to pay even higher fees for the smaller package than the already-inflated price of CBS’s larger, previously proposed bundle,” TWC said.

TWC said it asked CBS to provide a standalone offer with respect to its owned and operated stations. But the broadcaster declined, insisting the broad composition of its programming package was non-negotiable, TWC said. CBS has been “uncompromising” and “making demands that are completely inconsistent with the agreements we've reached with hundreds of other broadcasters,” it said on its website (http://bit.ly/1b2aTWt). TWC told customers that the price of programming impacts their monthly cable bills: “If we paid CBS what they are asking, the next broadcaster would ask us ... for even higher prices next time.”

CBS said there are no negotiations taking place between it and Time Warner Cable. Before the Friday deadline, the broadcaster asked Time Warner Cable “to continue the negotiation while our programming was still on the air in consideration for our viewers,” a CBS spokeswoman said. The operator rejected the request, “and told us that they'd have more leverage against us if they took us off their service,” she said. The broadcaster plans to respond to Britt’s letter, she added.

The dispute could be good for the consumer and TV industry over the long term, said Davenport & Co. analysts in a research note (http://bit.ly/16uSG2Z). If CBS believes it’s being underpaid for the value it brings to its distribution partner, then it needs to take a firm position on the pricing, they said. If Time Warner Cable doesn’t believe its economics will be hurt, “then by all means they should stop paying for the channel,” the analysts said: This is “an example of a free-market negotiation that should provide the consumer with the best product at the best price.” Underlying audience data indicates CBS “is significantly undervalued at the prior contract rate, and has more leverage,” said Davenport. “That leverage is growing as the start of the NFL season and fall broadcast seasons approach."

That there’s a docket (10-71) open on retrans, which was subject to a rulemaking notice, gives the commission some leverage before broadcasters and cable operators when it comes to retrans, said a broadcast executive. Retrans “is an issue in two specific rulemakings that are on the FCC’s plate now,” said American Cable Association President Matt Polka of retrans and 2010 quadrennial media ownership review NPRMs. “Each successive blackout or retransmission consent dispute further underscores the need for the FCC” to act, said Polka before the latest blackout began. “I don’t think there is any clearer case” by his association, the American Television Alliance (ATVA), public interest groups and others “that these laws and regulations are outdated,” said Polka. “They're in desperate need of reform, and further reluctance to change ... will only harm consumers increasingly."

ATVA and Public Knowledge bemoaned the denied Internet programming. CBS “has crossed the line from hardball tactics to outright abuse of consumers,” said Harold Feld, Public Knowledge senior vice president. If the FCC and Congress do nothing, “we can expect this to become a common tactic in future retransmission fights, further hurting consumers,” he said in a statement (http://bit.ly/13fE9Ei). The retrans fight has spilled onto the Internet, “proving once again that our video rules are in drastic need of reform in order to catch up with the changes to the video marketplace,” said a news release (http://bit.ly/15pM5bn) from ATVA. Its members include Time Warner Cable, both major U.S. DBS companies and other pay-TV operators and some public interest groups like PK.

DirecTV supported Time Warner Cable for fighting back “against exorbitant programming cost increases,” said the DBS company in a statement (http://bit.ly/17uaicq). “We are also appalled to learn that CBS is now punishing DirecTV customers, who may happen to have Time Warner as their Internet provider, by denying them access to CBS content online.”