John McCain Announces Bill to Address Pay-TV Channel Bundling, Aereo

Sen. John McCain (R-Ariz.) on Thursday announced proposed legislation titled The Television Consumer Freedom Act that would pave the way towards an a la carte system of pay television as well as penalize broadcasters who abandon public airwaves in the wake of digital TV upstart Aereo.

Singling out specific TV companies, including NBC Universal and Disney that license its channels, McCain said the the current system was “unfair and wrong.” He likened high cable bills due to the high cost of licensing ESPN as a “tax on every household,” and added that bundling is “an injustice being inflicted on the American people.”

As a result, McCain is reviving proposals he has made before to shift the pay-TV market from one where customers are forced to accept bundled packages to one where they are allowed to pick and choose which networks they want on their cable or satellite dial.

McCain described how it would work — introducing it by saying, “Notably, my bill offers no mandates, regulations and is entirely voluntary.”

Offering more detail, he said, “In order to give MVPDs an incentive to offer programming on an a la carte basis, the legislation links the availability of the compulsory copyright license to the voluntary offering of a la carte service by the MVPD.”

Besides potentially taking away the compulsory license to cable and satellite distributors who don’t offer broadcast stations on an a la carte basis, McCain said his bill contains a provision that allows programmers “to bundle their services in a package only if they also offer those services for MVPDs to purchase on an individual channel basis.”

Addressing carriage negotiating fights between programmers and distributors that have led to many blackouts in recent years, he said his proposal would also require that each side disclose their final offer to the FCC.

The bill is also directed at the broadcasters who are contemplating big changes in reaction to the emergence of digital TV streaming.

One of the features of the coming bill is to strip the licenses of any broadcaster that moves to a cable model. After broadcasters suffered a defeat at an appeals court against Aereo, which allows its customers to access over-the-air programming through digital devices, Fox, Univision and CBS threatened to go pay-only. The legislation would enact a high price on doing so.

“It would be a distortion of this basic social compact if over-the-air viewers were treated as second-class citizens,” McCain said. “This bill provides a legislative response if broadcasters either downgrade their signal or pull it altogether.”

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The proposed legislation, timed to the beginning of an oversight hearing next week at the Senate Communications Subcommittee, will likely face fierce resistance from broadcasters. Analysts have been expected legislative noise — not only because of the ongoing legal fights over Aereo and network bundling, but also because of the expiration of certain compulsory license laws such as the Satellite Television Extension and Localism Act.

McCain’s proposal also features a third big change in television. His bill addresses sports blackouts, including the rule prohibiting cable or satellite companies from carrying an NFL game that can’t be shown on a local over-the-air broadcast thanks to a non-sellout in live attendance.

The senator said, “The bill proposes to repeal the sports blackout rules insofar as they apply to events taking place in publicly financed venues and/or involve a publicly financed local sports team.”

Twitter: @eriqgardner