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Sen. Kerry Prods FCC Chief in Fee Impasse Between Cablevision and Fox

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SAN FRANCISCO, October 19th, 2010 -- Senator John Kerry (D-Mass) on Tuesday prodded Federal Communications Commission Chairman Julius Genachowski to take action in the business dispute between Cablevision and Fox Television when he sent over draft legislation that would change the way cable companies and broadcasters arrive at carriage agreements.

The legislation, sent over for FCC comment, proposes to allow cable companies to continue carrying broadcast programming if contract negotiations break down, but broadcasters would ultimately retain the right to pull their signals.

"The goal is to offer a path to potential resolution of differences and protect consumers," Kerry wrote in a letter sent Tuesday to Genachowski. "It would stave off the termination of carriage on expiration of an agreement and allow signals to continue transmitting until the FCC evaluates the behavior of the parties and recommends or does not recommend binding arbitration during which carriage would continue."

Kerry, chairman of the Senate Commerce Committee's communications, technology and internet subcommittee, added that the legislative proposal would still allow broadcasters to block their signals from being retransmitted. But it would only do so after achieving "much greater transparency" in the negotiation process, and "a more systematic effort at reaching agreement without consumers getting caught in the middle."

The proposed legislation would make the FCC the arbitrator throughout the dispute-resolution process, and the agency would have to determine whether each side is negotiating in good faith or not, and then take the appropriate actions to address the situation.

Kerry is one of several lawmakers who have in the past few days weighed in on the dispute between Cablevision and Fox over the payment of retransmission consent fees.

Most lawmakers have urged both sides to make more of an effort to come to some agreement so that the affected subscribers don't suffer through a sports black-out.

Cablevision charges that Fox is demanding unreasonable amounts of money for its programming, but Fox says that it's managed to reach agreements with other cable  companies, and that it's Cablevision that's being unreasonable.

The dispute is being closely watched by lawmakers, Wall Street and policy analysts because it's a long unresolved fight that affects both the profits of both firms and norms within their industries. At issue is also the broadcast industry's use of the public spectrum, a public resource.

The current contract between the two companies expired at midnight Friday. Cablevision's three million customers in the New York metropolitan region are no longer receiving their Fox-owned stations.

The two sides haven't been able to reach an agreement, and have instead extended their rhetorical war for public opinion to the pages of the New York Times, online social networks and web sites.

Fox has created a web site that enables Cablevision subscribers to find alternatives, for example.

The current dispute is the latest of several that have occurred over the past couple of years.

A coalition of cable companies and non-profit groups petitioned the FCC this March to change the rules regarding retransmission consent, saying that they're outdated.

Cablevision, along with Time Warner Cable, and the American Cable Association were among the 13 petitioners.

Like Kerry's legislative proposal, it proposes that the broadcasters should continue to allow the cable companies to carry their signals even after the contracts between the two sides have expired as the two sides negotiate, among other things.

Kerry noted in his letter that the FCC has yet to respond.

"The FCC has had sufficient time to consider the comments that have been filed on that petition and begin the process to revise its rules," he wrote. "But in the absence of FCC action, I feel a responsibility to begin to consider the smartest, least intrusive actions to reform the law."

Genachowski issued a statement Tuesday simply saying that he's called both sides to admonish them, and that the commission is monitoring the situation.

For a review of the issues at stake, and what the companies’ lobbyists are arguing in policy circles in Washington, DC, readers can refer to the Intellectual Property Breakfast Club’s event video from this June.

Sarah Lai Stirland was Contributing Editor for until April 2011. She has covered business, finance and legal affairs, telecommunications and tech policy for 15 years from New York, Washington and San Francisco. She has written for Red Herring, National Journal's Technology Daily, and She's a native of London and Hong Kong, and is currently based in San Francisco.

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