Hot on the heels of a 32-day blackout of CBS-owned channels for Time Warner (News - Alert) Cable subscribers, video retransmission rules will be the subject on Wednesday during a U.S. House of Representatives subcommittee hearing on the pay TV marketplace. Broadcasters and cable providers alike are girding their loins for battle, against the backdrop of a new proposal that would remove much of the networks’ leverage when it comes to disputes over the fees.

The U.S. House Committee on Energy and Commerce Subcommittee on Communications and Technology is hearing testimony this week on the effects of retransmission rules—and subsequent disputes between pay-TV providers and broadcasters.

Existing rules require cable, satellite, IPTV (News - Alert) and online providers to pay retransmission fees to the big national networks—ABC, CBS, FOX, NBC and so on—to include their programming on their basic TV tiers. The program inclusion is also required, hence the FCC’s (News - Alert) “must-carry” designation for the broadcast feeds. In recent years, the amount of money broadcasters are asking from pay-TV companies has escalated, prompting nasty disputes that in some cases, like in the recent Time Warner Cable-CBS dispute, have resulted in blackouts for consumers.

According to SNL Kagan, retrans fees were $215 million in 2006, followed by seven straight years of consistent growth. SNL Kagan estimates that fees will reach $3 billion this year and will skyrocket to $6 billion by 2018. Kagan analysis indicates that by 2018, the projected $6.05 billion of retrans revenues would be approximately 23% of the expected $26.2 billion in TV station ad revenues.

SNL Kagan projects that by 2018 the average fee paid per TV station will be slightly less than $1, while each multichannel subscriber will be responsible for aggregate retrans fee revenue of $4.86 per subscriber per month. Broadcasters obviously have leverage in the matter, and TWC said that CBS was actually asking for as much as $2 per subscriber per month, which was a 600% increase from the previous carriage agreement between the two. After a month-long blackout of CBS from TWC’s service, the two settled on a lower (undisclosed) number.

For all five major broadcast networks combined in 2015, multichannel providers are expected to pay $3.49 per month. In comparison, they will pay $6.37 per sub per month for ESPN (News - Alert), the most expensive carriage fee that pay-TV operators pay.

Cable companies and others tend to argue that the existing retrans rules inhibit competition in the pay-TV market and hurt consumers—not exactly a shocking position. Operators say that local retrans is out of control and forcing them to pass along cost to consumers, making for higher subscription prices and a more difficult competitive position.

"The cost of obtaining must-have broadcast programming continues to increase exponentially and consumers are feeling the impact through increased prices. Broadcasters are effectively using outdated rules to inhibit consumers from receiving the benefits of choice and a truly viable, competitive pay TV marketplace," CenturyLink’s regional vice president of regulatory and legislative affairs Jim Campbell said.

He said that over the past five years, CenturyLink has begun offering its Prism TV service to more than 1.5 million homes and has invested hundreds of millions of dollars in deploying high-speed broadband services to support its digital video product.

"While consumers have seen some slowdown in price increases from the incumbent cable provider in the markets where we've launched Prism TV, true competitive pricing unfortunately has not yet been realized," Campbell said.

He added, "CenturyLink favors a deregulatory approach under which the 1992 Cable Act would be amended to allow video providers the right to carry national programming from an adjacent or alternate market during a breakdown in retransmission consent negotiations as part of the reauthorization of the Satellite Television Extension and Localism Act of 2010, to restore balance to the video retransmission consent marketplace to the ultimate benefit of consumers."

Unsurprisingly, broadcasters disagree. “Time Warner Cable, DirecTV (News - Alert) and DISH are spending millions in Washington manufacturing a crisis over retransmission consent,” said National Association of Broadcasters CEO Gordon Smith, adding that they are “responsible for nine out of 10 disruptions of service.”

Rep. Anna Eshoo (D-Calif), ranking Democrat on the House Communications Subcommittee, earlier this week proposed the Video CHOICE Act, would give the FCC the authority to force broadcasters to keep their feeds on the air during negotiations—removing most of their leverage.

She said that it’s aimed at helping consumers who are “caught in the middle of a dispute they have no control over.” The proposal would also ban owners of local TV stations from making separate, redundant deals directly with pay-TV operators, and would pave the way for operators to roll out pay TV service without broadcast channels that demand high retransmission fees, so that consumers have the option to instead receive local feeds for free over the air via antenna.

The NAB’s Smith was quick to condemn the bill, which he said “could embolden pay-TV giants to continue to game the system.”

American Cable Association CEO Matthew Polka on the other hand called it “a timely and thoughtful plan for addressing serious problems causing harm to consumers.”

This week’s Congressional hearings are part of an ongoing effort by the government to determine what the FCC’s role is in smoothing retransmission negotiations going forward.

"The FCC needs to fix the shattered retransmission consent regime, stop programmers from demanding carriage within the most popular programming packages, and discipline Web-based content providers that block consumers' access to their services if the consumers' broadband access provider has refused to pay per-subscriber license fees to the content owners," Polka added.