FCC, Hill Remain Mostly on Sidelines Any CBS/TWC Dispute, Which FCC Hopes Won’t Happen

The FCC “is continuing to monitor the situation,” an agency spokesman told us. “We urge the respective parties involved to do what is in the best interests of consumers and viewers, and to reach a retransmission consent agreement as quickly as possible."

As of Thursday night when CBS and Time Warner Cable issued dueling news releases on the possibility of a blackout, staff of the Media Bureau and of FCC members’ offices didn’t appear to be pushing to avert a retransmission consent impasse, said agency and industry officials. Some said that lack of encouragement to renew a contract that’s set to expire at 5 p.m. Wednesday continued into Friday. With attention to the possible showdown in news reports, dueling websites on the possible blackout run by CBS (http://bit.ly/18phMQO) and Time Warner Cable (http://bit.ly/1axMDLR) and analyst notes to investors Friday, some at the commission are beginning to pay more attention, said an agency official.

If there’s a blackout of stations in the three largest U.S. markets plus markets ranked by Nielsen as No. 5, 7 and 11, it’s likely the agency would start to encourage CBS and Time Warner Cable to come to a new deal, predicted a broadcast executive not part of the spat. Stations that wouldn’t be viewable by the operator’s subscribers include WCBS New York, KCBS Los Angeles, WBBM Chicago, KTVT Dallas, WBZ Boston and WKBD Detroit, a CW affiliate, and WWJ(CBS) Detroit, said a Time Warner Cable spokeswoman. She said the operator negotiated the CBS carriage deal on behalf of Bright House Networks, where a spokeswoman said WWJ wouldn’t be able to be seen on BHN if there’s a blackout.

Bureau staff usually neither encourage nor discourage settlements before blackouts, said agency and industry officials. The staff unsuccessfully encouraged Dish Network to settle a retrans dispute with LIN in 2011 (CD March 7/11 p3), while staying more firmly on the sidelines the next year during a blackout of Hearst Television stations on Time Warner Cable (CD July 23/12 p8). Often staff get updates from lawyers for parties to a retrans dispute, though it’s unclear if that’s happening yet with Bright House, CBS and Time Warner Cable. Spokeswomen for the three companies had no comment on any communications with FCC and Hill officials.

Acting FCC Chairwoman Mignon Clyburn hasn’t shown it to be her priority to revise the rules governing good-faith carriage negotiations between a broadcaster and a multichannel video programming distributor, said agency and industry officials. While they said it’s possible she might take more interest if there’s a high-profile dispute in major markets like what may happen with CBS and Time Warner Cable, the more likely scenario is that any revisiting of good-faith negotiating standards occurs under Chairman nominee Tom Wheeler, assuming he’s confirmed by the Senate. Some said the agency could also move under Wheeler to refresh the record in a retrans proceeding begun under then-Chairman Julius Genachowski if Wheeler takes an interest in retrans and eyes major rule changes. There’s at present no retrans order circulating and prospects are dim for any to circulate anytime soon, said agency and industry officials.

Retrans “has become a difficult issue that seems to be stuck” at the FCC, said President Matt Polka of the American Cable Association, among the members of a coalition of MVPDs and public interest groups that have sought changes. “The answer can no longer be that we're not going to do anything.” TV stations and their broadcast networks “are using these outdated rules” to get more money in retrans renewals, said Polka. “It’s something that is only going to get increasingly worse, and as we see the networks become more and more involved, their demands are only going to be higher,” so that pay-TV bills rise further, he said. Broadcasters have said a small percentage of cable programming costs come from retrans (CD Feb 15/12 p5).

The number of blackouts of TV stations on MVPDs fell to 11 year-to-date 2013 versus 32 that occurred at any point between Jan. 1 and July 19 last year, said figures we analyzed from the American Television Alliance, of which ACA and most major MVPDs are members. Blackouts at any point last year, though, doubled from 2011, when the total of 16 rose from 4 in 2010, said the data. “Broadcasters will keep jacking up retrans fees unless Congress steps in and protects consumers,” said the alliance in a news release. Genachowski has said the agency was constrained in changing retrans rules by statute.

DirecTV, Dish and Time Warner Cable are involved in more than 70 percent of retrans disputes, and “are manufacturing a phony crisis in hopes that government will inject itself into free market discussions that have a success rate of more than 99 percent,” said an NAB spokesman by email. “We hope policymakers will ignore rhetoric from the pay TV lobby, allow private negotiations to go forward, and not reward those who use consumers as pawns in a disingenuous lobbying campaign.” Time Warner Cable plans “to drop the most popular programming in its entire channel lineup because it won’t negotiate the same sort of deal that all other cable, satellite and telco companies have struck with CBS,” said the broadcaster. “Time Warner Cable has dropped nearly 50 channels in the last five years. CBS has never been dropped by a cable company before. CBS remains committed to working towards a mutually agreeable contract."

CBS has the edge in the simmering dispute, and is likely to get $2 per Time Warner Cable subscriber monthly in any new deal, said Wells Fargo broadcast analyst Marci Ryvicker in an email. That’s “good for CBS in long run,” she said. “I don’t know if they go to blackout or not, but it is much easier to recoup ad dollars than to recoup subs.” There are about 3.5 million Time Warner Cable subscriber households that would be affected, representing 29 percent of the company’s video subscribers in Q1 “but just 10 percent of CBS’s total footprint,” Ryvicker wrote investors Friday. It’s the first possible blackout where cable analyst Richard Greenfield of BTIG Research thought an MVPD “was justified in going to war against a broadcaster,” he wrote clients. “We believe the leverage in this battle is far more balanced than in past retrans/programming disputes.” CBS stock closed down 1.9 percent to $52.50 Friday, while Time Warner Cable, which is subject to speculation it will be bought by Charter Communications or make an acquisition itself (CD July 1 p19), rose 2.3 percent to $116.47.

Time Warner Cable subscribers in all markets would lose Showtime and TMC in any blackout, said a spokeswoman for the operator. What CBS wants for its stations is 600 percent more than the average per-subscriber retrans fee Time Warner Cable pays for all other affiliates of the broadcast network, she said. “It’s unreasonable to expect our subscribers and Time Warner Cable to pay that price and we are negotiating very hard for a reasonable price,” the operator said in a news release. “This is not a standard debate over price increases.”