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Let CBS and Time Warner Cable duke it out

The longer CBS and Time Warner Cable continue to fight over retransmission fees, the more calls there will be for government to intervene on behalf of Time Warner customers who've been cruelly denied their right to watch "Under the Dome" and "Ray Donovan."

But this is one instance in which lawmakers and regulators should ignore the cries from the grass roots and consumer advocates. To do otherwise would be to deny CBS the leverage it should rightfully have in the dispute. That's true even though CBS is going to some unusual lengths to assert that leverage.

At issue, as Time Warner Cable customers know all too well, is how much the pay-TV operator will have to enrich CBS for the right to air the broadcast programming and cable networks it owns (which includes Showtime, home of the aforementioned "Ray Donovan"). In particular, the focus is on CBS' over-the-air signals, which carry some of the most popular shows on television.

The broadcaster is reportedly demanding that its fee more than double, from less than $1 per subscriber per month to $2. The increase would be phased in over the length of the contract, my colleague Joe Flint has written. Time Warner has acknowledged that it will have to pay more for CBS, just not as much as the network is seeking. The cable operator also wants something in return: the right to transmit the network's programming to mobile devices.

Lawmakers started rattling their sabers this week as the blackout dragged on, urging the two parties to end the dispute. For example, Sen. Edward Markey (D-Mass.) asked the Federal Communications Commission to bring the network and cable operator together to hammer out a deal.

More ominously, Markey also asked the commission to investigate CBS' decision to block Time Warner Cable's broadband customers from watching episodes of the network's shows on CBS.com.

"A consumer’s choice of cable television provider should not be tied to her ability to access Internet content that is freely available to other consumers," Markey wrote in his letter to acting FCC Chairwoman Mignon Clyburn. "In such instances, consumers lose their freedom to access the Internet content of their choice.  This is an anti-consumer result that I urge the Commission to investigate, and I encourage the Commission to actively defend Internet freedom and consumer rights."

The advocacy group Public Knowledge argues that the broadband blackout "crosses a line," particularly in the way it affects Time Warner broadband customers who aren't Time Warner Cable customers or who don't live in markets affected by the cable dispute.

"We need the FCC to step up, do its job and protect the millions of broadband subscribers who have nothing to do with this fight," wrote Harold Feld, the group's senior vice president, wrote on its blog (the emphasis is in the original). "The FCC may believe that Congress authorized a steel cage, no holds barred, death match between cable providers and broadcasters around access to local broadcast signals; it did not authorize CBS to drag in millions of broadband subscribers and punish them as a means of putting additional pressure on Time Warner Cable."

Feld is either arguing that Time Warner's broadband customers are entitled to watch CBS programming online because the company obtained airwaves from the government for free, or that once CBS makes its shows available to anyone online, it has to offer them to everyone. Neither is true, however.

CBS' public-interest obligations extend only to its broadcast signal. What it does online is purely up to the network. And the economics online are quite different from the ones for local broadcasts. The network has to pay for the bandwidth it uses to stream shows, and the streams typically aren't as lucrative as over-the-air broadcasts because advertisers pay significantly less for commercial time online than they do for primetime slots.

As for the argument that CBS is singling out Time Warner broadband customers unfairly, content owners discriminate among Internet users all the time. Most commonly, they put geographic limits on their music and video files. They also offer exclusive content to selected groups; pay-TV subscribers, for example, can access numerous shows that non-subscribers can't. Here, CBS is essentially telling Time Warner customers that they aren't eligible to watch programs online because their service provider hasn't paid enough for the privilege.

It's worth noting that CBS isn't withholding its programs from the Time Warner broadband users. They can still tune in the shows aired by the local CBS station via an antenna, assuming they can get a strong-enough signal.

Angry Time Warner customers should hold their fire for a moment -- I know an antenna doesn't work for everybody. (Rabbit ears work for me, but my house has a clear view of the broadcast towers on Mt. Wilson.) And I don't think CBS is helping its cause by rendering CBS.com off-limits to Time Warner broadband users. In fact, it's doing the opposite: It's encouraging them to find other ways to obtain its programs online, of which there are many, and only some of them are legal.

Beyond that, the blackout is encouraging Time Warner customers to discover programs they like on other networks, and explore forms of entertainment that don't rely on a cable box. The risk for both companies is that the dispute is hastening their industry down the path that the music industry took after the advent of MP3s, when consumers quickly lost interest in paying for more (e.g., CDs) than they actually wanted (99-cent singles).

Along those lines, Sen. John McCain (R-Ariz.) introduced a bill three months ago that would put pressure on pay-TV operators to offer channels on an a la carte basis. It was a long-shot then, and probably remains so today. But the high-profile battle between CBS and Time Warner certainly hasn't hurt its chances. Perhaps that will offer Time Warner customers a smidgen of comfort as they pine for "NCIS."


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