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TWC to FCC: CBS Should Have Made Offer Without Showtime

In a letter to the FCC on Friday, the cable distributor takes the network to task for "coercive bundling" and for cutting off CBS.com from its broadband subscribers.

Les Moonves - P 2013
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Les Moonves

In the midst of a breakdown between CBS and Time Warner Cable over a new retransmission agreement, the Federal Communications Commission could soon be getting involved.

On Friday, after an impasse caused CBS to be taken off Time Warner Cable systems, TWC filed an ex parte letter at the FCC. The commission is currently examining rules relating to retransmission consent. The letter characterizes CBS' "aggressive tactics" as ones being made that "powerfully underscore the flaws of the retransmission consent regime."

In addition, the letter objects to the way that CBS is blocking some Internet access for some of TWC's customers -- something that could flare up the net neutrality debate once again -- as well as detailing some of the stumbling blocks in negotiations between the two companies. The cable company asserts that CBS' "coercive bundling practices" is undermining the retrans system set up by Congress. One of the revelations from the document is that TWC wanted CBS to make an offer that wouldn't include Showtime.

When CBS was blacked out for TWC customers last week, the cable company attempted to show its customers how they could get CBS programming anyway. A video tutorial on an on-demand channel tried to train subscribers in how to hook up computers to a television. The idea was that these customers could then go to CBS.com, pull up shows and transmit them from the computer to the TV.

One problem: CBS seems to have anticipated that and blocked these folks from watching content posted to its website.

TWC is angry. In the letter, the company's lawyer writes: 

"Remarkably, CBS not only has subjected TWC’s video subscribers to programming blackouts but also is blocking TWC’s broadband Internet access subscribers from accessing programming on CBS.com … Such blocking represents the antithesis of acting in the public interest and flies in the face of Congress’s goals in enacting the retransmission consent regime. Indeed, CBS’s anti-consumer conduct is subjecting TWC’s broadband subscribers to online blackouts even if they purchase MVPD service from another provider or access CBS’s programming over the air, and even in geographic markets where no CBS station went dark. In addition to accelerating work on the reforms described below, the Commission should make clear that such abusive conduct will not be tolerated by broadcast licensees and their affiliates." 

Although it hasn't gotten a great deal of attention, TWC also appears to be making the case that CBS is attempting to use its leverage to bundle its programming. So-called "coercive bundling" has recently engendered a lawsuit from Cablevision against Viacom.

STORY: 5 Big Shows Some Time Warner Cable Customers Can't Watch

According to TWC's letter, CBS has conditioned licensing its primary owned-and-operated stations by saying any deal "must also include the purchase of CBS-affiliated pay-television programming services, at rates and terms that CBS could never obtain if those programming services were sold separately."

TWC says that it has requested a "standalone offer" but that CBS has refused to give it.

Does TWC really want to drop Showtime if it had the option? Here's what TWC is telling the FCC:

"While CBS purported to offer a smaller programming package in the days preceding the blackout, that 'offer' still sought to bundle CBS with Showtime, and in any event was clearly a sham designed to whitewash CBS’s coercive conduct, as it would have required TWC to pay even higher fees for the smaller package than the already-inflated price of CBS’s larger, previously proposed bundle. As TWC and others have explained in this proceeding, such abusive conduct is growing increasingly common among the Big Four broadcast networks, each of which controls a large portfolio of affiliated pay-television programming services."

TWC goes on to say that CBS' alleged "coercive bundling" is not what Congress had in mind when attempting to ensure the public's access to free over-the air television. It says, "As the current dispute with CBS illustrates, broadcasters’ efforts to condition the grant of retransmission consent on the purchase of other programming services are now impeding consumers’ access to local broadcast signals by making blackouts more likely and more frequent."

The cable company wants the FCC to crack down on bundling practices, clarifying "that 'good faith' negotiation requires broadcasters to offer standalone terms for retransmission consent, and that such standalone terms cannot be 'sham' offers that make purchasing a larger programming package the only economically rational option."

In addition, TWC asks for new rules that would allow for interim carriage in the event of a negotiating impasse. The full letter is below. We've asked for CBS' response and will update accordingly.

E-mail: Eriq.Gardner@THR.com
Twitter: @eriqgardner