Network exec took aim at the cable company in New York City Council testimony, and cable exec fought back while calling the regulatory system broken
Calling television viewers who have lost access to CBS shows "innocent victims in the corporate crossfire" as its dispute with Time Warner Cable continues, CBS Thursday defended its negotiating tactics to a joint hearing of two New York City Council committees.
Martin Franks, CBS's executive VP, told a combined hearing of the Committee on Consumer Affairs and the Committee on Zoning and Franchises that the extent of the dispute is unlike anything CBS has ever encountered.
CBS has repeatedly negotiated retransmission right "without a hint of public discord, much less having our channels dropped," Franks said in written testimony.
"I have personally overseen successful and mutually beneficial negotiations with companies like AT&T, Cablevision, Charter, Comcast, DirecTV, Dish Network, RCN, and programming for their millions of subscribers.
"Only this latest negotiation with Time Warner Cable has gone badly off course."
Franks said that over the same period Time Warner Cable has had more than 50 subscriber disruptions and he blamed the cable company for the current disruption.
"CBS continued to negotiate in good faith through last week. In conversations during the day last Friday, we made it clear that we were willing to leave our signals on Time Warner while we continued to seek a new agreement.
"The fact was reiterated to the highest levels of Time Warner literally at the 5 p.m. deadline, but instead of continuing to talk, Time Warner Cable told us they would have more leverage in the negotiation if they dropped us, which they immediately proceed to do."
Franks said Time Warner Cable acted despite having received a new 100-page retransmission proposal and despite the two companies having made progress on elements of a new contract and he disputed Time Warner Cable's contention that the cost of the obtaining retransmission was too high.
"First they insist they cannot possibly pay the price we are asking without passing those costs on to consumers. That is one choice they have, but despite rising programming costs over the last three years, their handsome overall profit margins have remained constant. They could easily choose to absorb these programming costs … and still be profitable," Franks said.
Rory Whelan, Time Warner Cable's regional VP-government relations, told the committees that the dispute is the result of a "broken" regulatory system, "in dire need of reform."
He said a retransmission licensing provision Congress crafted to strengthen local programming "has now become a vehicle for imposing massive costs on cable operators and their customers for retransmission of free over the air broadcasts.
Whelan said CBS had rejected "common sense" proposals to resolve the dispute that would allow it "to reasonably meet its own commercial objectives and restore its programming."
"CBS's President and CEO Les Moonves made clear earlier in negotiations that his company's stance was anything but constructive. Consistent that declaration, CBS is now engaging in outrageous, punitive conduct by blocking TWC's Internet access subscribers from viewing CBS programming online-even from customer who do not purchase cable service from TWC."
Whelan called the action "akin to yanking television antennas off our customers’ roofs."
In Washington, consumer group members of the American Television Alliance ripped the dispute and called on the Federal Communications Commission to step in immediately to provide some relief and for Congress to change the law to provide longer term relief.
"Although CBS stations have a public obligation to make their programming freely available, they are demanding payment from cable providers and satellite providers and playing one off against the other in ways that lead to an increasing number of blackout situations that only hold consumers hostage," said Michael Calabrese, director of the Wireless Future Project at New America Foundation, one of four consumer groups on a Washington press call Thursday.
"The system is broken," added Harold Feld, senior VP of Public Knowledge, one of four consumer groups on a Washington press call Thursday.
The consumer groups pointed especially to CBS's blocking Time Warner Cable Internet customers from seeing CBS programs on the Web.
Feld called on the FCC to "at least protect the rights of Time Warner Cable Internet subscribers who have lost access to CBS programming even if they get their TV shows from other providers."
"The FCC should say this is out of bounds," he said.