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What's behind the TV carriage disputes

Dale Roe
For a few days this month, customers of AT&T U-Verse could not see Rachael Ray and other Food Network stars. The channel returned to the lineup Nov. 7.

Carriage disputes just aren't sexy.

These ongoing battles that cable and satellite services have with those who produce television content would be a lot more fun to write about if they were like a passionate, fiery skirmishes between star-crossed lovers. The sad truth, though, is that they more resemble a series of repetitive arguments between a dysfunctional couple that stays together for financial reasons.

To paraphrase Sam Malone from "Cheers," are your favorite channels as turned off as I am right now?

Carriage disputes result when the contract between a broadcast or cable television network (such as ESPN, which is owned by ABC/Disney) and a satellite or cable provider (Time Warner Cable, Dish Network, DirecTV, etc.) is up for renewal. If the two parties can't agree on what the provider should pay the creator for the right to broadcast the channels, the channels can be dropped when the contract expires (the parties, though, may — and often do — agree to continue broadcasting while post-deadline talks carry on).

The skirmishes seem to be happening more often. In the past four months, we have seen AT&T battle with Crown Media, Rainbow Media and Scripps; while Time Warner Cable has taken on Disney and ABC. Dish Network, meanwhile, has waged a retransmission battle with Fox.

In July, Rainbow threatened to pull AMC from U-verse just before the season premiere of the Emmy-winning drama "Mad Men." Hallmark Channel and Hallmark Movie Channel remain unavailable to U-verse subscribers — they were dropped in September when AT&T and Crown Media could not come to terms.

Disney's September battle with Time Warner centered on compensation for the right to carry ABC network programming as well as various ESPN and Disney channels. In the same month, the provider then battled ABC on the local level over compensation for KVUE and other Belo Corp. stations.

Fox's regional sports networks disappeared from Dish Network's lineup for the month of October as the two parties failed to meet a Sept. 30 deadline for renegotiation. The ongoing dispute came close to resulting in Fox network programming being pulled, too, before a resolution was reached on Oct. 29.

Most recently, five Scripps channels, including the widely popular HGTV and Food Network, vanished from U-verse when a carriage agreement could not be reached. The channels were absent for a few days before returning on Nov. 7.

None of these stalemates has proved as disruptive as the 2008 skirmish between KXAN and Time Warner, which resulted in Austin's NBC affiliate being unavailable to the cable company's subscribers for nearly the whole month of October.

Viewers, caught in the middle and increasingly weary of the disputes, often lash out at the providers.

"I really don't care about contract disputes," a commenter posted to our blog entry about the Scripps/U-verse bout. "I have an agreement with ATT uverse to provide programming, which included HGTV and DIY networks. The failure of ATT to provide that, violates our agreement and I will be forced to find another provider."

"I am disappointed and appalled at ATT (sic) for doing such a thing to me as a customer," read another comment. "If this is not restored in a timely manner it is enough to make me cancel my service and switch to another carrier, one who is not willing to put me in this situation for their own gain."

Not one of the comments took Scripps to task for demanding higher fees for its content, an expense that surely would have been passed to U-verse subscribers.

"When consumers aren't getting the content that they're paying for, the first person they complain to is their cable company," says John Breyault, vice president of public policy, telecommunications and fraud for the National Consumers League. "I think there's blame to be laid on both sides in this, but I think it's just symptomatic of a broken system."

Breyault has a theory about the increasing frequency of the disputes. "I think it's because you are seeing content creators who are struggling to adapt to a new business model," he explains. "They're not making as much money as they used to off of advertising, for example, and so they're trying to find ways to make up for that lost revenue. And these retransmission fights and the carriage fees are an easy way to do that."

The channel owners don't deny that they're seeking more money. But they point to the providers' profits and generally claim the increase they are demanding is no greater than what is currently being paid by other providers for the same channels. The providers, meanwhile, insist that their subscribers are being used as pawns by channel owners in order to obtain obscene fee increases.

Breyault adds that in these disputes the timing of the transition from ongoing negotiations to full-blown war can be suspect.

"What you see — it's sort of a pattern — is that they negotiate, negotiate, negotiate to try to come up with a carriage fee that works and eventually, when they don't reach a successful conclusion, the content provider says ‘OK, well, if you can't reach an agreement with us, we're going to pull your programming,'" Breyault says. "And usually they'll find some sort of must-watch event to try and leverage that. Big college football games are big ones. The World Series was one in a Cablevision fight. The Super Bowl has been it before ... so, any number of ways to try and leverage a higher deal."

Unfortunately, there seems to be little consumers can do. Voting with your pocketbook doesn't really help since content creators must conduct separate negotiations with all providers.

"From a consumer advocate's view, consumers lose either way," Breyault says. "No. 1, they lose if they can't reach an agreement and there's a blackout of the content. No. 2, they lose if the cable company knuckles under and agrees to a higher carriage fee, which inevitably gets passed along to the consumer."

Breyault thinks the problem could be alleviated with more options for consumers, who dream of a la carte programming — the ability to subscribe to and pay for individual channels rather than programming packages. But providers are unlikely to move away from the profitable, entrenched model of pricing tiers.

"Most cable companies will offer a basic package and an expanded basic, and most consumers do expanded basic," Breyault explains. "I think there's a sweet spot between those two tiers where you could find consumers who don't want to pay for all the extra channels but would be able to pay for those they most want to watch."

Ultimately, the advocate believes the Federal Communications Commission should get involved. "We think the system is being abused and consumers are the ones who end up paying for it in the end," he says. If the FCC is unwilling to exercise enforcement, Breyault advocates a legislative fix.

Government intervention might be in the offing, as the Senate holds an "informational" retransmission-consent hearing Wednesday in light of an ongoing carriage dispute between Cablevision and Fox. Witnesses are expected to include broadcasters, who do not welcome governmental oversight, and providers, who agree with Breyault that the system is in need of repair.

In the meantime, we're likely to be subjected to more of the tiresome haggling. In addition to compensation, the recent negotiations between U-verse and Scripps dealt with AT&T's right to distribute television content on nontraditional platforms including the Internet and mobile devices.

"Content creators have not really figured out how to monetize that yet," Breyault says. "Consequently they are losing money and these retransmission fights are one easy way for them to try and recoup some of that money."