FCC to Seek Ways to Protect Viewers in Fee Disputes

U.S. regulators will propose rules to protect television viewers from being blocked from channels during fee disputes such as the fight in October that blacked out Fox programming for 3 million cable viewers, an official said.

The Federal Communications Commission will begin early next year an inquiry into regulations, William Lake, chief of the agency’s media bureau, said today in a speech in Washington.

“A principal concern is to protect consumers when talks break down,” Lake said.

Cablevision Systems Corp. asked the FCC in October to intervene after News Corp.’s Fox pulled programming in the New York and Philadelphia markets after Cablevision refused to pay a fee for the programming. The two-week interruption ended Oct. 31 as the companies agreed to terms they didn’t disclose.

Throughout the industry, broadcasters are asking cable and satellite companies to pay for content that was previously free, igniting disputes. Pay-TV providers such as Cablevision have balked at the fees, arguing the channels are free over the public airwaves and on the Web.

Pay-TV operators typically pass the fees to consumers as higher rates, a practice the companies are finding is becoming harder because of a sluggish economy.

Disputes over the charges have caused seven blackouts of cable and broadcast channels this year, the most in at least a decade, affecting about 19 million pay-TV subscribers, according to data compiled by Bloomberg.

Good-Faith Negotiations

Companies wouldn’t be able to pull signals before regulators check for good-faith negotiations under legislation that had been proposed by Senator John Kerry, a Massachusetts Democrat.

“There’s no need to introduce legislation at this time,” he said. The FCC is acting “to address the now all-too-frequent disruptions that consumers have experienced.”

FCC Chairman Julius Genachowski has concluded the agency has limited power to prevent program blackouts, Lake said. He said the agency “will take a broad look at what more we might do” with “our current authority.”

Time Warner Cable Inc., Cablevision and pay-TV providers Dish Network Corp., DirecTV and Verizon Communications Inc. want regulations that constrain broadcasters’ leverage, Rebecca Arbogast and David Kaut, Washington-based analysts for Stifel Nicolaus & Co., said in a Nov. 1 note.

“We expect broadcasters will mount fierce opposition to such regulation as unauthorized by the current statute and bad policy that interferes with market negotiations,” they said.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Allan Holmes at aholmes25@bloomberg.net

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