Cable companies and broadcasters have a stormy but important role to play in each other's businesses. To get TV content such as "Grey's Anatomy" and "NCIS," cable companies have to bargain with broadcasters. Cable companies want to pay the lowest possible price for those shows. But broadcasters, in an effort to ensure that local TV stations have the money they need to stay on the air, have an incentive to extract as much money from the cable companies as they can.
When these negotiations break down, they can result in weeks-long TV blackouts, putting a big dent in your service. In 2013, for instance, Time Warner Cable and CBS couldn't agree on the right level of "retransmission fees," so CBS pulled the plug. TWC paid a heavy price in the end, as it saw hundreds of thousands of customers walk out the door during the month-long blackout.
Cable companies also blame rising retransmission fees as a reason why your cable bills keep going up. The cost of these programming agreements has surged by 8,600 percent in the past seven years, according to the FCC.
The broadcasters' main industry group in Washington, the National Association of Broadcasters, says it's really sports networks and cable channels that are behind your soaring bills. Certainly, these fees (represented in red and yellow below) account for the vast majority of the programming costs for cable companies:
Still, fees to broadcasters have risen the most of all since 2006, and when talks go south, "consumers take the blows," FCC Chairman Tom Wheeler wrote in March.
So the FCC is doing two things to keep that from happening. The first is a proposal to lift a ban on how cable companies can behave when a blackout occurs. Right now, it's illegal for cable companies to respond by piping in the blacked-out shows from some other city's TV stations. The proposed change would give cable companies more bargaining power, because it weakens the effect of a threatened blackout.
Broadcasters are unsurprisingly steamed about this idea. The National Association of Broadcasters said that these exclusivity rules are "a lynchpin of the local broadcast business model" and that removing them could hurt consumers. A spokesperson for the cable industry's top trade group, the National Cable and Telecommunications Association, declined to comment.
The second thing the FCC is exploring is an update to how the agency oversees negotiations between broadcasters and cable companies. Traditionally it has taken a hands-off approach, which has benefited broadcasters, saying that so long as both sides are negotiating in good faith, it won't step in.
But the FCC is about to undertake a "robust examination" of what it means to negotiate in good faith, Wheeler said Wednesday. The probe could lead to a change in rules that doesn't favor broadcasters.
"The mere opening of an FCC inquiry," Guggenheim Securities analyst Paul Gallant said in a research note, "might become a headwind for broadcasters if they conclude that blackouts are now a risky tactic that might provoke the FCC into a hostile position."
These twin efforts could ultimately shift the balance of power between cable companies and broadcasters. It may give cable firms more power to slow the rise in retransmission fees and greater leverage to prevent TV blackouts. But will that lead to relief for consumers on the rates that cable companies charge? That's still not clear.