Time Warner Cable Pays CBS Turning Focus to FCC

NEW YORK ( TheStreet) -- Time Warner Cable ( TWX) is claiming something of a victory in its drawn-out, four-week tug-of-war with CBS ( CBS), which had triggered a blackout of the network's channels for cable-TV subscribers in New York, Los Angeles and Dallas.

Outgoing Time Warner Cable CEO Glenn Britt made clear in a statement what industry observers have been positing throughout the blackout -- the cable-TV operator's motivation was less about its negotiation with CBS and more about forcing the Federal Communication Commission to reconsider the very touchy issue of retransmission fees.

CBS and Time Warner Cable ended their payment dispute on Monday and programming resumed in millions of homes later that evening.

At present, cable and satellite-TV operators pay broadcasters a "retransmission fee" to take their free over-the-air signal and digitize it for their customers. The current structure grew out of 1992 federal regulations that Time Warner Cable would very much like to see the FCC reopen and revise.

Britt's statement lays it out: "... We are also encouraged by the 50+ consumer organizations and legislators that supported our call for Congress and the FCC to reassess the 1992 retransmission consent rules. The rules are woefully out of date, are the primary reason cable bills are rising, and too frequently leave our customers without the programming they love. We sincerely hope that policymakers heed that call and take action to prevent these unfortunate blackouts soon."

Time Warner Cable was rising on the agreement, adding 1.5% to $108.99 in afternoon trading while CBS was jumping 3.8% to $53.05.

CBS, the country's most-watched network, as CEO Leslie Moonves will tell anyone willing to listen, probably got exactly what it wanted all along, said Todd Juenger, a media analyst at BernsteinResearch, in an investor note published today.

"There's no way CBS would have reduced their price demands just as their negotiating leverage was increasing (and TWC knew that from the start)," Juenger wrote.

Marci Ryvicker of Wells Fargo Securities concurred. "Our gut tells us that this dispute favored content over distribution (we hear that TWC moved a lot further than CBS), with CBS receiving similar rates and terms to what it recently signed with Verizon FiOS (that 3-year deal was signed 8/22, with sub fees reaching $2/month over time, and includes incremental payments for digital rights)."

Fans of the National Football League and the U.S. Open can now breathe a bit easier knowing that CBS will be back on their Time Warner Cable dial, and as always, in its much coveted position at channel 2.

The damage to Time Warner Cable in customers breaking their subscription won't be clear until the company reports its third-quarter earnings on Nov. 5. For Britt, the fracas with CBS will likely mark a final very public attempt to prompt the FCC to reopen the issue of retransmission fees. But if history is any guide, reworking the country's telecommunications laws takes many years, which leaves CBS and other networks in an enviable position to continue to extract more money for their programming.

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>News stories and columns by LeonLazaroff.

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