A Congressional proposal to let cable and satellite customers choose which broadcast TV channels they pay for has led to a battle between small cable companies and broadcasters. While cable companies usually are opponents of mandates to sell channels individually instead of in bundles, in this case they are fighting for à la carte and against the broadcasters. The “Local Choice” proposal by US Sen. Jay Rockefeller (D-WV) and Sen. John Thune (R-SD) affects local broadcast stations such as affiliates of NBC, CBS, ABC, and Fox.

A group called TVfreedom.org that represents local broadcasters and other organizations today criticized the American Cable Association (ACA) for supporting Local Choice. “We believe ‘Local Choice’ represents a frontal assault on free and local TV broadcasting,” TVfreedom Public Affairs Director Robert Kenny wrote. “It would tilt television’s balance of power in favor of pay-TV providers at the expense of broadcasters invested in localism. It would cost consumers more on their monthly bills, and do nothing to address shoddy pay-TV service or the deceptive billing practices of cable and satellite TV providers.”

TVfreedom is composed of “local broadcasters, community advocates, network television affiliate associations, multicast networks, manufacturers and other independent broadcaster-related organizations” and says its mission is to make sure “cable and satellite TV providers [are] held accountable for stifling innovation and repeatedly using their own customers as bargaining chips while increasing their record profits.” The group chided the ACA for supporting à la carte pricing this year despite arguing in a previous case that “current technology costs make à la carte a financial impossibility for ACA member systems, the business model is entirely unproven, and no lawful basis exists for imposing regulated a la carte.”

But that ACA statement arguing against à la carte came in January 2008. The ACA, which represents small cable operators, has changed its views and disputes TVfreedom’s take on Local Choice. The group wrote approvingly of the proposal last month, saying it would “end local TV station blackouts and expand consumer choice in the receipt of local broadcast television stations from cable and satellite TV providers.”

ACA CEO Matthew Polka wrote this week that under Local Choice, “TV stations would set the price of their channels on pay-TV systems and collect all the revenue. TV stations that are local-ratings winners would be in position to command the highest fees. TV station-initiated blackouts permitted under current law would never happen again. And pay-TV consumers would not have to pay for TV stations they don’t want and could do so without giving up pay-TV entirely, which current law does not permit in the case of cable subscribers.”

In response to the TVfreedom criticism, ACA VP Ted Hearn told Ars today that "ACA—a leader in calling for more consumer choice going back many years—is certain that the last thing TVFreedom wants to talk about is the pro-consumer, free-market provisions in the Rockefeller-Thune Local Choice proposal, which would eliminate blackouts and gatekeepers while letting cable customers decide how much to pay for 'free TV.'"

No more blackouts

In theory, the Rockefeller-Thune proposal would end financial disputes between pay-TV companies and broadcasters like the one that led Time Warner Cable to temporarily black out CBS last year in protest of CBS price hikes, or the blackout of Raycom-owned local stations on DirecTV this week. TV broadcasters make billions of dollars every year on retransmission consent fees and could stand to earn less if consumers can choose which channels to buy.

The senators’ summary of their Local Choice proposal says it would require every local broadcast TV station to be available to pay-TV subscribers. "All MVPDs [multichannel video programming distributors] in the local broadcaster’s market are required to make the broadcast signal available to their subscribers at the broadcaster-set price," it says. "MVPDs cannot mark up the price and must remit the fees they collect to the local TV station."

The benefits, according to the summary, are that "Local Choice gets rid of blackouts, makes sure that broadcasters are fairly paid, and puts viewers in control by giving them meaningful choice over their programming options and offering more opportunity to control the cost of their pay-TV subscriptions."

The Local Choice proposal is an add-on to the pending reauthorization of the Satellite Television Extension and Localism Act, which lets satellite companies retransmit out-of-market broadcast TV channels to rural customers. The National Association of Broadcasters opposes attaching Local Choice to the satellite bill, saying there isn’t enough time to review the proposal and that it is not “an appropriate vehicle for reviewing the retransmission consent process." But the latest draft of the satellite bill reportedly includes the Local Choice text.

While cable lobbyists generally oppose any effort to sell channels to consumers individually instead of in high-priced bundles, Local Choice wouldn’t prevent them from selling bundles of non-broadcast channels. The National Cable & Telecommunications Association (NCTA), which represents the biggest cable companies, hasn’t taken a public position on Local Choice.

“Cable lobbyists, who have opposed any sort of à la carte in the past, are more amenable to the Rockefeller-Thune concept because it would remove a controversial byproduct of retransmission consent negotiations—local market blackouts that deprive people of programming like NFL games,” Politico reported. (The NFL is fighting to save blackout rules that prevent cable and satellite companies from importing game broadcasts from distant stations to show in local areas.)

If Local Choice doesn't pass as part of the satellite bill, it could be taken up again next year. And while it applies just to broadcast channels, The Washington Post reported last month that “insiders say that Local Choice could even be a stepping stone to consumers' long-awaited Holy Grail: an unbundling of all the channels offered on cable.” But a complete unbundling may end up being a pipe dream, the Post noted: "That would be a much more contentious fight, and pretty much everything about this plan is a long shot right now."