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Why the FCC Is Not Taking Action to End the CBS Blackout on Time Warner Cable

Despite calls from politicos and industry critics for the Federal Communications Commission to intervene in the dispute between CBS and Time Warner Cable, the agency’s hands are tied — for now.

On Aug. 2, CBS-owned stations in New York, L.A. and Dallas went dark on Time Warner Cable systems after talks between the companies broke down. The cable operator also removed Showtime and three other cablers from lineups nationwide in the dispute.

“I request that the commission take action to bring the parties together so these negotiations can be concluded in an equitable and expeditious manner,” Sen. Ed Markey (D-Mass.) wrote in a letter last week to FCC acting chairwoman Mignon Clyburn.

However, the FCC becomes formally involved in a retransmission-consent dispute only if one of the parties files a complaint with the commission, alleging that the other party has failed to negotiate retransmission consent “in good faith” as required under the rules established by the 1992 Cable Act, according to a source familiar with the commission’s procedures.

So far, neither CBS nor Time Warner Cable has filed such an official complaint with the FCC.

SEE ALSO: Time Warner Cable Subscribers Sue Over CBS, Showtime Blackout

Meanwhile, after the Eye’s stations went dark on Time Warner Cable, CBS.com began blocking all Time Warner Cable broadband customers from access full-length episodes. The blockade affects Time Warner Cable high-speed Internet customers nationwide, even those who have a different TV provider.

“If Time Warner Cable is a customer’s internet service provider, then their access to CBS full episode content via online and mobile platforms has been suspended as a result of Time Warner Cable’s decision to drop CBS and Showtime from their market,” the Eye said in a statement about the move.

But again, for now, the FCC doesn’t have the legal authority to stop CBS’s Internet blockade. The commission in late 2010 established “network neutrality” rules, but those apply only to Internet service providers, who are barred from blocking or otherwise discriminating specific applications and content. (By the way, the network neutrality order is being challenged in court by Verizon, which claims the commission is overreaching its authority.)

Time Warner Cable, in an Aug. 2 ex parte filing with the FCC, complained about CBS’s bundling and Internet blocking tactics — but from a technical standpoint, that was not a formal complaint.

The MSO called on the agency to “take definitive action to address the coercive bundling practices used by CBS and other major broadcasters. In particular, the Commission should clarify that ‘good faith’ negotiation requires broadcasters to offer standalone terms for retransmission consent, and that such standalone terms cannot be ‘sham’ offers that make purchasing a larger programming package the only economically rational option.”

FCC acting head Mignon Clyburn, commenting about the CBS-Time Warner Cable standoff at an Aug. 9 commission meeting, said she was “deeply disappointed” and “really distressed” that the companies were unable to resolve the dispute and end the blackout.

“The commission of course is actively monitoring the status of this particular dispute and is in fact in touch with both parties,” she said. “That consumers and viewers are being adversely affected, and my primary concern — we will continue to urge all parties to stay and resolve in good faith this issue as soon as possible. However, I will affirm to you that I am ready to consider appropriate action if this dispute continues.”

SEE ALSO: Time Warner Cable Taking Bigger Hit Than CBS in PR War Over Blackout: Survey

Some industry observers and consumer advocacy groups argue that the FCC must follow the spirit of the law that set up the retrans rules, which were designed to make sure Americans wouldn’t lose the ability to watch broadcast TV stations on cable.

“(W)e are shocked that the FCC is sitting idle, while consumers are being harmed by media marketplace changes that have impacted the balance of power in retrans negotiations,” BTIG Research analyst Rich Greenfield wrote in a blog post Thursday. Clyburn “has the power and authority to intervene and Congress expects her to act promptly when consumers lose access to local broadcast signals,” he said.

Other critics say that the CBS move to block the cable operator’s Internet customers from accessing Internet video clearly is out of bounds, and that it gives the FCC a basis to take action.

“CBS’s blocking tactic clearly violates the ‘rules of engagement’ Congress intended when it created the (retrans) system,” Harold Feld, a senior veep at consumer-advocacy group Public Knowledge, said in a blog post. “We need the FCC to step up, do its job and protect the millions of broadband subscribers who have nothing to do with this fight.”

Time Warner Cable, in its Aug. 2 letter to the FCC, agreed that “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.”

CBS declined to comment.

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