To recap, CBS and TimeWarner (as a cable operator) are required to regularly reach an agreement on the terms under which CBS's owned-and-operated (O&O) local broadcast stations are carried on cable systems in their broadcast areas. During the last round of retransmission consent negotiations, reports indicate, CBS insisted on more money for carriage than Time Warner was willing to pay. Under the 1996 Telecommunications Act, if agreement isn't reached within a certain time frame, the cable system is required to stop carrying the local station's signal. As part of CBS's negotiating strategy, allegedly, was to also force Time Warner to pay higher carriage fees for CBS cable-only channels, Time-Warner dropped all of those channels as well. CBS responded by cutting access to cbs.com (and the programs it provides access to) to all Time-Warner internet service customers.
The programming blackout extends to some 3.5 million homes in some of the largest TV markets in the US, and will inevitably have an impact on ratings as well as the value of the CBS and TWC brands. CBS trumpeted that it remained in first place in Nielsen ratings for the first full week of the blackout, despite a small decline in total viewers. But CBS shouldn't crow too much, it's top prime time show only grabbed a 1.4 rating and saw a 30% drop in viewing. (I'll note that August is traditionally a low viewing month, and that the ratings don't include the estimated 5 million people who get their programs online).
The impact on local station ratings - particularly for their local news programs - has been much more significant. At LA's KCBS, viewership for their main local news programs fell 25-33% from the previous week; NY's WCBS saw 17% declines, and Dallas-Ft Worth O&O KTVT saw their news numbers fall 13-19% (depending on which news broadcast). The declines are enough to trigger make-goods and is impacting last-minute ad sales. Their is significant concern at the local level about continuing impacts, particularly if the blackout continues into the fall sweeps period (which traditionally determine local advertising rates).
That both parties are concerned about the impact of the blackout can be seen in some recent deals between CBS and TWC to temporary lifting of the blackouts - to carry the NY mayoral and comptroller campaign debates in New York, and offering the Tennis Channel during the U.S. Open Tennis championships.
This week, current FCC interim chairman Mignon Clyburn weighed in, expressing frustration that CBS and TWC haven't reached a settlement. The FCC, though, has limited authority to intervene in negotiations or to order interim carriage of the signals in violation of current law. Former FCC commissioner Michael Copps weighed in, arguing that CBS's actions may violate the FCC's Network Neutrality provisions.
“CBS is perpetrating an audacious violation of the FCC Open Internet ('net neutrality') rules... These rules guarantee consumer access to lawful content. They are designed to prevent just this sort of corporate censorship.”