Courtesy Charlotte Observer

(November 27, 2009) Time Warner Cable launched a public relations blitz Wednesday, asking customers whether they'd be willing to pay higher rates to get certain channels.

In newspaper and TV ads, the cable giant is asking subscribers whether it should "roll over or get tough" with local stations and cable networks seeking higher fees for their programming and asks customers to cast a vote at www.rolloverorgettough.com.

It is an issue that has become increasingly contentious in the recession as stations seek to make up revenues lost to declining advertising by asking cable and satellite providers to pay more for their programs.

Companies like Time Warner Cable have balked at the demands, arguing that the costs would have to be passed on to customers.

"Because of the weak ad market, some programmers are demanding up to 300 percent more," said Melissa Buscher, spokeswoman for Time Warner Cable's Carolina region. "We're asking customers if they're willing to pay more or do you want us to get tough with programmers and networks."

"Local broadcast stations are still the most significantly viewed channels on the local cable systems," said Tim Morrissey, general manager of Charlotte's WCNC (Channel 36) and vice president for television with the Raleigh-based N.C. Association of Broadcasters.

"ESPN can get $4 a month per subscriber and broadcasters get pennies."

WCNC's retransmission agreement with Time Warner Cable has about another year to run, Morrissey said.

Federal transmission act

In 1992, Congress said cable companies could no longer carry local broadcast stations without their agreement, called retransmission consent.

This allowed local broadcasters to negotiate a fee for carrying their programming.

It recognized that cable firms derive value from showing local stations, which - with their network affiliations and local news content - are their most-viewed channels.

It is not unusual for stations to negotiate a monthly fee of about 20 to 25 cents per cable subscriber per month to carry their content. In contrast, ESPN - widely viewed as the industry's most aggressive broadcaster in rate demands - typically commands more than $3 per household per month from cable and satellite providers.

Local stations argue their cable ratings dwarf those of any cable network, and they should be worth more. When satellite TV services began offering local stations a few years back, they saw an immediate jump in subscribers, and the numbers are still rising.

In the 22-county Charlotte market, for example, satellite penetration to households has increased from 29 percent last year to 32 percent. Cable penetration has fallen from 63 percent to 59 percent, according to Nielsen.

Cable companies, concerned about pricing, argue that they must hold the line on paying retransmission fees. Increases get passed along to the customer, they say. Time Warner Cable is coming off a January rate hike of 4 percent to 9 percent, depending on the level of service.

Additionally, cable providers say, local TV is available for free over the air and doesn't equate to specialty channels like ESPN, which has expensive programming contracts with professional sports leagues.

Recent fighting

When broadcasters and cable companies fail to reach agreement on carriage fees, the channels can be blacked out. WSOC (Channel 9) and sister station WAXN (Channel 64) settled a fee dispute at the eleventh hour in March that threatened to take both stations off Time Warner Cable.

In 2000, the ABC-owned Raleigh-Durham station WTVD went dark briefly on Time Warner Cable until an agreement was reached.

Time Warner Cable serves about 490,000 subscribers in the Charlotte area and about 810,000 in the Raleigh-Fayetteville-Wilmington region. Overall, it has 2.1 million customers in the Carolinas.

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