The Federal Communications Commission has decided not to step up its oversight of contract disputes that sometimes take free, over-the-air channels off cable systems.

Broadcast stations can demand carriage fees from cable TV operators even if the channels are otherwise available for free to consumers with an antenna. When cable TV companies and broadcasters don't agree on a price, customers are sometimes deprived of channels.

The FCC can already intervene in contract disputes when it deems it necessary, but a lobby group for small and medium-sized cable TV providers wanted the commission to do a lot more. When FCC Chairman Tom Wheeler announced the decision to maintain the status quo last week, the American Cable Association (ACA) lobby group said it was "appalled."

"The Chairman's decision ignores the plight of millions of consumers... who have repeatedly been victimized by broadcasters' heavy-handed bargaining tactics, such as pulling signals prior to a marquee event like the Oscars or baseball's All-Star game," ACA CEO Matthew Polka said in a statement last week.

The ACA often urges the FCC to roll back regulations instead of imposing more strict ones, having sued the FCC to stop net neutrality and other rules. But the group believes that broadcasters deserve stricter regulation because the high prices they charge for the right to carry channels signifies a "market failure." The problem is particularly severe for small cable companies, according to the ACA.

"Frequently, a broadcaster demands the smaller cable operators pay an exceptionally higher per-customer fee than other larger operators in the same market," the ACA says. "Cable operators who refuse to accept the higher charge (as it frequently would result in higher rates for customers) face retaliation from the broadcaster—a dropped signal and the refusal to allow a cable operator to deliver its programming to customers."

"Never have consumers paid so high a price for ‘free TV,'" Polka also said in the statement. There have been 600 TV station blackouts since 2010, according to research cited by the ACA.

FCC: “Totality of circumstances” test is broad enough

FCC Chairman Tom Wheeler described the decision in a blog post, saying that the commission's current policies for intervening in so-called retransmission consent negotiations are strict enough. US law requires broadcasters and pay-TV operators to negotiate in good faith, and the FCC established a list of objective standards to judge whether there's been a per se breach of the good faith negotiation obligation, he wrote.

"Even if the specific standards are met, the Commission may consider whether, based on the totality of the circumstances, a party failed to negotiate retransmission consent in good faith," Wheeler wrote. The FCC reviewed the commission's current policies and invited input from all stakeholders, but FCC staff determined that more rules are not needed.

"It is hard to get more inclusive than to review the 'totality of circumstances,'" Wheeler wrote. "To start picking and choosing, in part, could limit future inquiries. So, today I announce that we will not proceed at this time to adopt additional rules governing good faith negotiations for retransmission consent."

The FCC's review of its totality of the circumstances test was begun after Congress directed the FCC to undertake the proceeding in a bill related to satellite TV regulations. But while Congress asked the FCC to review its policies, it didn't require the FCC to change them. Wheeler noted that Congress could pass legislation expanding the commission's authority if it so chooses.

The ACA had asked the FCC to change its criteria so that "behavior that causes harm to consumers or the public interest" would be deemed evidence of bad faith under the totality of circumstances test. The ACA also wanted the FCC to prevent broadcasters from insisting that broadcast signals be bundled with regional sports networks and so-called "must carry" channels that can be carried by cable operators without payment. Such bundling raises prices, the ACA said.

The ACA also wanted a ban on blackouts that involve online programming. These online blackouts prevent customers from accessing streaming video on a cable provider's Internet service during contract disputes.

The National Association of Broadcasters praised the FCC's decision, saying that broadcasters are "fully committed" to upholding the good faith standard "so that consumers can continue to receive our high-quality local content whether over the air or through a pay TV service."

Despite the FCC's decision, Wheeler promised that the FCC will not "turn a blind eye" to disputes that harm customers. The commission is getting involved in one prominent dispute involving Dish and Tribune Media. After failed negotiations, Tribune last month said that its 42 local television stations and the WGN America cable channel had been pulled from Dish's satellite TV service. Tribune stations include affiliates of CBS, ABC, NBC, Fox, and the CW Network, as noted by The Wall Street Journal.

Wheeler "summoned both parties to Washington to negotiate in coordination with Commission staff," his blog post said. That step failed to produce a contract agreement, so FCC staff is now reviewing whether either or both parties violated the good faith requirement.

"And we do not need one of the parties to a negotiation to cry foul before acting in the public interest," Wheeler added. "The Commission can investigate a potential good faith violation on its own and take enforcement action when a party fails to fulfill its statutory obligations."

In a separate matter, Wheeler's FCC in 2014 eliminated its sports blackout rules, leading to the end of an NFL policy that blacked out local games that weren't sold out. The FCC at the time noted that companies could still enforce blackouts via privately negotiated contracts.