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Blackout Nation: After CBS-Time Warner Cable Feud, Rules About TV Deals Aren’t Likely to Change

Regulatory changes unlikely in wake of retransmission-consent standoff, despite lobbying by pay TV operators to fix ‘broken’ system

For 32 days, more than 3 million Time Warner Cable and Bright House Networks customers were collateral damage in the fight between TW Cable and CBS over fees and rights to programming.

Now that the two sides have come to terms, in a deal reached over Labor Day weekend, what’s different?

Nothing much at all — except that TW Cable is paying more money to distribute largely the same content supplied by the Eye, yet another thumb on the scale of the rising cost of pay TV. According to industry sources, Time Warner Cable will initially pay somewhat less than $2 per sub monthly for CBS-owned stations (up from 75 cents to $1 previously) rising to the two-dollar mark over the life of the five-year contract.

SEE ALSO: CBS, Time Warner Cable Reach Deal to End Blackout

Pay TV operators have stepped up their calls for regulators and politicians to intervene, arguing that broadcasters have too much leverage in such fights. But don’t expect the rules to change anytime soon, which means more networks are likely to fade to black, either temporarily or indefinitely, in the months and years ahead.

FCC acting chairwoman Mignon Clyburn, in comments Monday after the CBS-TW Cable deal was announced, reinforced the agency’s position that its hands are tied with respect to mediating such disputes or otherwise forcing the companies to settle. “At the end of the day, media companies should accept shared responsibility for putting their audience’s interests above other interests and do all they can to avoid these kinds of disputes in the future,” she said.

There simply doesn’t appear any regulatory or legislative movement toward new laws or rules that would stave off TV blackouts, said MoffettNathanson principal Craig Moffett, a longtime industry analyst.

“I’m not sure what the FCC could do, and I don’t think Congress has any appetite to get involved,” he said.

Among the next big possible dust-ups, involving broadcast and cable nets: Dish Network’s agreement with Walt Disney Co. for ABC-owned stations, ESPN and other cable nets, reached back in 2005, is set to expire Sept. 30, 2013. Dish chairman Charlie Ergen last month said the satcaster is prepared to drop ESPN and other Disney networks if the companies can’t reach a deal, while ESPN chief John Skipper last month expressed confidence a deal with Dish would get done.

One of Time Warner Cable’s ulterior motives in digging in its heels against CBS in the standoff apparently was to show to Washington that the system is in dire need of reform. TWC picked the fight “to take advantage of a moment in time to score points with regulators,” Sanford Bernstein analyst Todd Juenger wrote in a research note. The blackout was the longest of a major broadcaster since the Federal Communications Commission adopted the retrans rules in 1992.

TW Cable CEO Glenn Britt said in a statement the MSO was “encouraged by the 50-plus consumer organizations and legislators that supported our call for Congress and the FCC to reassess the 1992 retransmission consent rules. The rules are woefully out of date, are the primary reason cable bills are rising, and too frequently leave our customers without the programming they love. We sincerely hope that policymakers heed that call and take action to prevent these unfortunate blackouts soon.”

Time Warner Cable also was trying to win Internet-streaming rights for the Eye’s shows, arguing that paying higher retrans fees entitled it to additional VOD content. But the cable company lost that battle: TW Cable would not pay extra for those rights, whereas CBS is able to cut deals with subscription VOD providers like Netflix, Amazon and Hulu for such secondary windows.

SEE ALSO: Should the U.S. Government Ban TV Blackouts?

According to the National Assn. of Broadcasters, there is no problem with the current rules — just some of the players. The trade group says 89% of the blackouts related to retransmission-consent disputes in the last two years have involved one of three operators: Time Warner Cable, DirecTV and Dish Network.

“Rather than drum up a phony crisis that would inject government into the free-market, these three firms might better spend their time working toward amicable resolutions over TV programming most valued by viewers,” NAB exec VP of communications Dennis Wharton said. “We believe broadcasters deserve to be fairly compensated for the most-watched programming on television.”

Note that a smaller retrans spat between TW Cable and Milwaukee-based Journal Broadcast Group, affecting stations in four U.S. markets, remains unresolved after nearly six weeks with those stations still blacked out after going dark July 25.

SEE ALSO: Next Big TV Fight Looms: Would Dish Drop ESPN and ABC?

The American Cable Association, which reps about 850 smaller and midsize independent cable companies, contends the problem is widespread and growing worse.

The CBS-TW Cable fight “showed that the retransmission consent market is broken and outdated rules governing these negotiations need to be updated to reflect current market conditions,” ACA president and CEO Matt Polka said in a statement. “If CBS can leave millions of pay-TV viewers in the dark for 32 days, no one can say with a straight face that the marketplace is working well for consumers.” The group has proposed the FCC adopt rules that let TV signals remain on the air while retrans deals are hammered out.

The National Cable & Telecommunications Assn. declined to comment on the issue of retrans reform. Its members include Comcast, which owns NBCUniversal.

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