Cable May Gain Edge in Fee Disputes With Local Broadcasters

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A regulator’s proposal could help cable companies during fee disputes with local broadcasters by freeing them to carry out-of-town television stations.

The plan, made public by Federal Communications Commission Chairman Tom Wheeler Wednesday, was among a package of media rules that Wheeler said he sent to agency commissioners for approval.

That provision may have helped Time Warner Cable Inc., for instance, in late 2013 when the provider lost video customers as it went a month without CBS Corp. programming during a fee dispute.

The FCC’s 50-year-old rules preventing cable providers from providing out-of-market stations during disputes “have been rendered unnecessary by today’s marketplace,” Wheeler, a Democrat, said in a blog post. The parties can set exclusivity restrictions without the FCC, Wheeler said.

Wheeler’s proposal “would threaten the vibrancy of our uniquely free and local broadcast system,” Dennis Wharton, a spokesman for the National Association of Broadcasters, said in an e-mailed statement. Wharton, whose trade group represents broadcasters including CBS and Comcast Corp.’s NBC, called exclusivity rules “a linchpin of the local broadcast business model.”

The proposal is “potentially a very big deal” by giving cable and satellite providers options during negotiations, said Craig Moffett, an analyst with MoffettNathanson LLC.

Consumer Disaster?

Broadcasters earlier told the FCC that eliminating the agency’s exclusivity protections would give cable and satellite providers unfair leverage in negotiations over fees for carrying TV stations’ signals, the FCC said in an order last year.

Trent Duffy, a spokesman for the American Television Alliance, said in an e-mailed statement that Wheeler’s proposal “a step in the right direction for protecting consumers.” The alliance lists partners including Time Warner Cable and satellite-TV providers.

Charter Communications Inc. and Cablevision Systems Corp. told the FCC that the exclusivity rules should be repealed because they help create “a windfall for broadcasters and a disaster for consumers” as fees rise when TV stations threaten a programming blackout during negotiations. Charter has proposed buying Time Warner Cable, the second-largest U.S. cable company.

Losing Subscribers

The cable operator lost about 300,000 video subscribers during the third quarter of 2013, which included its dispute with CBS. The fight that blocked service to pay-TV subscribers in New York, Los Angeles and Dallas ended as Time Warner Cable agreed to pay more for the right to carry CBS.

CBS has led the way in squeezing cable, satellite and phone companies to pay for traditionally free broadcast TV.

“We have the most watched programming there is anywhere, and we will get paid the appropriate amount for it,” CBS Chief Executive Officer Leslie Moonves said Aug. 5 on an earnings call.

With ad sales and cable subscriptions stalled, and more people watching online, licensing fees have become an important source of income for programmers.

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