Cable, TV standoff rooted in federal regulations

Oct 14, 2008 (Dayton Daily News - McClatchy-Tribune Information Services via COMTEX) -- TWX | Quote | Chart | News | PowerRating -- The growing standoff between cable operators and TV networks over retransmission fees has its roots in government regulation and the changing telecommunications industry.

In the 1950s, Congress granted networks the right to designate a single affiliate station in every market so advertisers would buy into the new medium and consumers could watch free. Decades later, Congress gave a break to another fledgling industry by allowing cable operators to retransmit TV station signals free of charge.

But in 1992, with cable companies firmly entrenched all over the country, Congress overturned that law, giving TV stations the right to negotiate retransmission fees.

For years, TV networks asked little or nothing in return for cable retransmissions, largely because cable was offering them a profitable new stream of advertising revenue.

Today, with the networks competing for dwindling advertising dollars, TV stations want top dollar for their retransmission rights, and cable companies are balking.

Time Warner Cable subscribers in the Dayton area have been without NBC programming since midnight Oct. 2, when the cable company and the owner of WDTN-TV Channel 2 failed to reach a long-term consent agreement.

Those talks continued Monday, Oct. 13.

With about half of the TV industry's consent agreements due to expire Jan. 1, cable subscribers everywhere can expect more station blackouts, says Michael Malone of Broadcasting and Cable magazine.

Barry Faber, vice president of Sinclair Broadcast Group, owner of Dayton's Fox 45 and WKEF Channel 22, said TV stations are looking to minimize costs and maximize revenue like every other business in today's tough economy.

That doesn't bode well for customers of Time Warner, which will soon be in negotiations with Fox affiliates, said Rich Greenfield, an analyst with Pali Research.

Cable executives complain they are forced to pass higher retransmission fees on to cable consumers for programming viewers can get free with an antenna. "We get the blame because we're the ones who have to collect the fees from the consumer," said Matt Polka, president of the American Cable Association.

But TV networks say cable firms benefit plenty from their programming. "The proof is that 95 percent of satellite consumers are willing to pay $5 to $6 extra to get the local TV stations," Faber said.

The TV industry is far bigger and more diffuse than it was when government passed the "non-duplication laws" granting regional network monopolies, cable executives have said. They want the law changed so they can negotiate consent fees with a variety of TV stations transmitting the same programming, whether in Dayton, Cincinnati, Indianapolis or Columbus, Polka said.

Greenfield believes Time Warner has the most to lose -- subscribers likely will defect to satellite and phone TV services to get their missing NBC programming, he said.

Despite the Time Warner blackout, Lisa Barnhorst, station manager at Channel 2, said the NBC affiliate is reaching "more than half our market" through other carriers. "It's business as usual here," she said.

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