FCC, Congress could decide on consumer protections

The carriage battle between Cablevision and Fox went nuclear over the weekend, even spilling over into the broadband realm. And the fallout is likely to hasten action on the retransmission consent front in Washington.

Fox’s Gotham and Philadelphia stations went dark for Cablevision’s 3 million subscribers at 12:01 a.m. Saturday — including fans of baseball’s Phillies, whose playoff game aired on the net — as the sides failed to come to terms on a new deal covering Fox’s Gotham stations, WNYW and WWOR, and Philadelphia’s WTXF.

Cablevision and Fox execs met on Saturday and again Sunday in an effort to reach an agreement. They broke Sunday after making “no material progress,” according to Fox, as they remain far apart on deal terms, but the sides agreed to meet again Monday. Both camps accuse the other of merely going through the motions at the negotiating table for political cover. There’s no question the political heat is rising.

The Cablevision-Fox meltdown immediately grabbed the attention of pols and regulators who have been closely watching the string of recent fights between programmers and subscription TV providers that have resulted in a loss of service to consumers.

FCC chairman Julius Genachowski and key congressional reps involved in telecom policy are casting the service interruption fights as a consumer protection concern, which could grease the wheels for legislative action.

Fox threw gasoline on that fire Saturday by temporarily blocking access for Cablevision broadband subscribers to the Fox.com website and Hulu. Informed sources say Fox’s move was a bid to increase its leverage with Cablevision by making it harder for Cablevision subs to watch Fox programming amid the station shutoff. But Fox backed down after a few hours and restored access to the sites, undoubtedly after realizing the firestorm its move would unleash in Washington.

Consumer advocates were quick to howl as word of Fox’s blocking move spread Saturday.

“Consumers should have the right to watch online content, and this access should not be tied to a dispute over cable television carriage arrangements,” said S. Derek Turner, research director for journo watchdog Free Press. “This move is also an example of a major user of public spectrum abusing the public interest.”

Congress and the FCC are already in the throes of tackling thorny Net neutrality and broadband regulatory questions, aiming to address concerns about Internet access being manipulated by private business concerns. However, Fox’s move to block its own website and its co-owned Hulu venture is a new wrinkle, as the Net neutrality policy debate mostly revolves around the prospect of broadband providers favoring some sites and content providers over others because of business relationships.

The retransmission consent law that mandates cable, satellite and telco operators cut a carriage deal with local station owners to carry their signals has been targeted for overhaul by numerous pols and the cable lobby.

Sen. John Kerry (D-Mass.), chairman of the Senate Commerce Committee, said in a statement Saturday that he would introduce legislation to overhaul the nearly 20-year-old retrans law. Rep. Ed Markey (D-Mass.) sent a letter Saturday to Genachowski urging the FCC to “broker” a deal between Cablevision and Fox. He also sounded the alarm about Fox’s broadband-blocking move, calling it “patently anti-consumer.”

“The FCC needs to more than monitor negotiations in such circumstances,” Markey wrote. “It needs to actively defend Internet freedom and consumer rights.”

As the Oct. 15 contract expiration drew near, Cablevision began pushing for the sides to submit to binding arbitration to settle the contract fight while the stations remained on Cablevision’s systems. Numerous local pols chimed in on the call for arbitration, especially as the shutoff hampered Cablevision subscribers’ ability to watch WNYW’s coverage of baseball’s National League Championship Series on Saturday and the Detroit Lions-New York Giants NFL contest on Sunday.

“The longer this shameful News Corp. blackout of the NFL and Major League Baseball continues, the more obvious it becomes to everyone, including political leaders of both parties, that binding arbitration is the fastest and fairest way to return Fox programming to Cablevision customers,” Charles Schueler, Cablevision exec VP of communications, said Sunday.

Fox has steadfastly rejected the calls for arbitration. Fox has asserted that “direct business-to-business negotiation is the only way to resolve the issue…Cablevision needed to stop hiding behind a call for government intervention and negotiate in good faith.”

As the clock ticked late Friday afternoon, Cablevision issued a statement asserting that the FCC had the power to order the companies into arbitration without a disruption in service. An FCC official did reach out to both companies on Friday to urge them to seek a settlement without yanking the stations, but the FCC did not make a formal move. Minutes after the stations went dark, Genachowski issued a sternly worded statement that wagged a finger at both sides but stopped short of promising FCC intervention in the matter.

“While federal law provides that the terms will be set by agreement between private companies, Fox and Cablevision share responsibility for protecting their audience’s interests,” Genachowski said. “I expect both companies to live up to this responsibility.”

Genachowski had no immediate comment on Fox’s move to block Cablevision subs from accessing Fox.com and Hulu.

Cablevision is running a three-minute video on the slots previously dedicated to WNYW and WWOR emphasizing that the decision to yank the stations “was News Corp.’s, not ours.” It also accused Fox of engaging in “an attempt to extort unreasonable and unfair fee increases” for the stations.

Fox is believed to be asking for retransmission fees that would start at about 50¢ and escalate to nearly $1 per subscriber per month over the course of a five-year agreement — similar to the terms Fox struck with Time Warner Cable after negotiations went down to the wire on New Year’s Day but did not result in an interruption in carriage.

Cablevision maintains that Fox is asking for more coin than the cabler pays to carry the local stations of ABC, CBS, NBC and Univision combined. Fox has led the charge among the Big Four broadcasters to seek real money from cable and satellite operators in retrans deals rather than horse-trading those rights for carriage of new cable channels and other considerations. (The Fox-Cablevision standoff also involves three channels that Fox previously used retrans rights to secure carriage: Fox Business Network, Nat Geo Wild and Fox Deportes.)

Broadcasters focused on retrans as an untapped revenue source after local advertising sales were battered amid the recession.

One Wall Street analyst who has closely watched the recent spate of retrans and carriage battles — including Cablevision’s fights with Disney and Scripps Networks and Fox’s ongoing wrangle with Dish Network, which could escalate at the end of the month — believes Cablevision is waging a losing war.

“Fox is laser-focused on capturing significant retrans dollars, and we see no reason why they would give in this year,” Richard Greenfield of BTIG Research wrote in a research note distribbed Friday morning. “Cablevision cannot be without Fox programming for more than a few days.”

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