The Collapsing Cable Model and the Rise of FAST

The 39% Cap and the Netflix-WBD Merger:

How the Senate Hearing on the 39% Cap and the Netflix-WBD Merger Are Reshaping the Global Content Order

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The regulatory framework underpinning the U.S. broadcast industry has entered a full-scale reassessment phase.

With the Senate Commerce Committee announcing a hearing on the 39% national reach cap, and Netflix’s proposed acquisition of Warner Bros. Discovery (WBD) undergoing rigorous scrutiny before the Senate Judiciary Committee, both issues fundamentally question the relevance of existing regulatory frameworks in a media market that has been restructured around streaming. These developments are also poised to have structural implications for the global distribution strategy of Korean content.

1. The 39% Cap Hearing: The Fate of the Nexstar-TEGNA Merger Hangs in the Balance

Senate Commerce Committee Chairman Ted Cruz (R-Texas) has announced a full committee hearing titled "We Interrupt This Program: Media Ownership in the Digital Age" scheduled for February 10 (U.S. time). The hearing will begin at 10:00 AM ET and will be livestreamed via the committee’s website and YouTube.

Confirmed witnesses include Newsmax CEO Chris Ruddy, NAB (National Association of Broadcasters) CEO Curtis LeGeyt, Thomas Johnson, partner at law firm Wiley Rein, and Steve Waldman, president of Rebuild Local News.

The central issue at stake is whether the FCC regulation limiting a single broadcaster’s national TV household reach to 39% should survive. This regulation is directly linked to Nexstar and TEGNA’s $6.2 billion merger proposal, which would result in a combined FCC-measured reach of 54.5%—far exceeding the current cap.

Chairman Cruz struck a relatively neutral tone, stating that "as the media marketplace rapidly changes, many have questioned whether broadcast ownership rules should reflect these new realities," while also including language about "preventing corporate censorship of conservatives." The committee’s announcement also noted that "some telecommunications experts contend that the current 39% cap is statutory, meaning it can only be changed by an act of Congress and not through regulation," suggesting this debate could expand into questions about the scope of FCC authority.

The two sides remain sharply divided. The NAB has argued that "regulations written before the internet even existed constrain local broadcasters while not applying to cable and streaming competitors," calling for a level playing field. Ruddy, on the other hand, has strongly demanded that the 39% cap be maintained and has signaled willingness to pursue legal action if the regulation is repealed. In its FCC filing, Newsmax argued that "the 39% cap was set by Congress and the FCC has no legal authority to change it," even invoking the Supreme Court’s Major Questions Doctrine.

FCC Chairman Brendan Carr has stated he has not yet made a final decision, but has repeatedly remarked that broadcasters face a "break glass moment" against "trillion-dollar Big Tech-owned streaming services."

Internal Rifts Among Religious Broadcasters

This debate has also triggered internal divisions within the religious broadcasting community. Trinity Broadcasting Network (TBN) president Matthew Crouch filed an FCC comment alleging that the National Religious Broadcasters (NRB) association’s support for maintaining the 39% cap was effectively driven by Newsmax’s influence.

Crouch pointed out that "among NRB member companies, there is exactly one that has nothing to do with Christian programming or broadcasting and is advocating for the cap purely for its own business reasons—Newsmax." TBN, conversely, supports abolishing the ownership cap, arguing that "for Christian broadcasters, free over-the-air television is virtually the only platform to reach viewers."

2. The Netflix-WBD Merger Review: A Triple Gauntlet of Politics, Antitrust, and Culture Wars

Netflix CEO Ted Sarandos appeared before the Senate Judiciary Committee’s Antitrust Subcommittee on February 3, facing intensive questioning about the WBD acquisition proposal. The hearing, titled "Examining the Competitive Impact of the Proposed Netflix-Warner Brothers Transaction," was chaired by Subcommittee Chairman Mike Lee (R-Utah). WBD was represented by Bruce Campbell, Chief Revenue and Strategy Officer (CRSO).

In his opening remarks, Chairman Lee noted that both Netflix and HBO Max (Max) are subscription-based streaming services, and that Netflix and Warner Bros. compete in TV and film production. He warned that "if Netflix acquires WB’s library and production capabilities, it would have both the incentive and the ability to disadvantage competitors." He also pushed back against Sarandos’s characterization of YouTube as a primary competitor, stating that "YouTube doesn’t require a subscription and doesn’t offer full-length movies. It’s not the same business."

Republican senators also focused their criticism on the political bias of content. Senator Eric Schmitt (R-Missouri) warned that the deal would create "not just a content monopoly, but a monopoly on the most ‘woke’ content in the history of the world." Senator Josh Hawley (R-Missouri) took issue with transgender-related content aimed at children, claiming that "Netflix is pushing content in a way that undermines parental authority." According to CNN, Hawley’s claim that "nearly half of Netflix children’s programs" contained such content was based on a report from a conservative media outlet affiliated with the Heritage Foundation.

Sarandos defended Netflix by comparing it to a "large video supermarket" that caters to diverse tastes, insisting that "there is no political agenda in Netflix programming." He presented data showing that Netflix’s share of U.S. TV viewing was only 9% as of December, and that even combined with HBO Max, the total of approximately 10% would still be lower than YouTube’s 12.7%. He also emphasized that 80% of HBO Max subscribers already subscribe to Netflix, positioning the two services as complements rather than substitutes.

On the antitrust front, Democratic Senator Amy Klobuchar (D-Minnesota) raised concerns about competitive harm, noting that "whenever the largest player in an industry seeks to grow even bigger, there are always consumer concerns." Senator Cory Booker (D-New Jersey) pressed Sarandos about his meeting with President Trump two weeks before the deal announcement in November. Sarandos responded that "we discussed the entertainment industry broadly, and the deal was a very small part of it."

Meanwhile, the National Taxpayers Union (NTU) sent a letter to Senate Judiciary Committee leadership urging a pro-competition, light-touch approach, arguing that the committee should "not fall into the ‘big is bad’ fallacy" and should make the consumer welfare standard the "North Star" for merger review.

The Justice Department is investigating both deals and is just getting started interviewing rivals and business partners. Both Netflix and Paramount face regulatory reviews abroad as well.

3. Accelerating Pay-TV Subscriber Losses: Michigan Falls Below 1 Million

Michigan Falls Below 1 Million: A Microcosm of U.S. Cord-Cutting

The Michigan Public Service Commission (MPSC) recently released its annual report, "Status of Competition for Video Services," which provides a compressed illustration of the structural decline in the U.S. pay-TV market.

In 2025, Michigan’s video and cable subscriber count fell to 980,543—a decrease of more than 120,000 from the previous year’s 1,100,636—marking the first time the state’s subscriber count has fallen below the one million mark since record-keeping began. The number of franchise operators also declined from 29 to 28.

Total Number of Video/Cable Subscribers in Michigan (Source: MPSC Provider Survey)

Michigan’s pay-TV subscriber count peaked at 2.3 million in 2015 and, aside from a brief pandemic-era rebound in 2021, has declined by 40% over the past five years. Customer complaints, however, have actually increased—surging 117% from 808 in 2024 to 1,751 in 2025, with the most common complaints involving cable line issues, billing disputes, and internet service quality. Since the report excludes satellite TV providers, the actual scale of traditional pay-TV subscriber losses is likely even greater.

The Vicious Cycle of Programming Fee Increases: The Retransmission Fee Structure

One of the key drivers of U.S. pay-TV subscriber attrition is the structural escalation of programming fees, particularly retransmission fees. These are fees that local broadcast affiliates (ABC, CBS, NBC, FOX, etc.) charge cable and satellite TV operators for the right to retransmit their channels.

Introduced by the Cable Television Consumer Protection and Competition Act of 1992, this system requires pay-TV subscribers to bear additional costs for broadcasts that were originally available for free via over-the-air antennas.

According to S&P Global Market Intelligence, the average monthly per-subscriber retransmission fee for Big Four network-owned and affiliated stations rose from $4.52 in 2024 to $4.83 in 2025—a 7% increase. Total gross retransmission and virtual subscription revenue is projected to reach $15.4 billion by the end of 2025, growing to $17.5 billion by 2030.

The problem is that this cost structure creates a vicious cycle that accelerates cord-cutting. As subscriber numbers decline, broadcasters demand higher fees from remaining subscribers to maintain revenue, which in turn drives up pay-TV prices and triggers further subscriber attrition. Major broadcast groups such as Nexstar, Sinclair, Gray, and Scripps now derive more than half their revenue from retransmission fees and continue to raise rates regardless of subscriber trends.

In 2024, the FCC implemented its "All-In Pricing" rule, requiring cable and satellite TV operators to consolidate retransmission fees, regional sports fees, and other programming-related charges into a single, prominently displayed monthly total on bills and advertisements—rather than hiding them as separate surcharges. As this rule took effect between late 2024 and early 2025, subscribers could for the first time see the full cost of their video service on the first line of their bill, making the true price of pay-TV starkly visible.

Before the All-In Pricing rule, cable and satellite operators would advertise a base monthly rate (e.g., $59.99) while burying additional charges such as "Broadcast TV Fee" and "Regional Sports Surcharge" in a separate fees-and-taxes section. According to Consumer Reports, these company-imposed fees averaged $37 per month—approximately 24% on top of the base service price. Consumers signed up based on advertised prices, but actual bills were significantly higher, with the source of the discrepancy difficult to identify.

With the All-In Pricing rule, these hidden fees are now merged into a single figure on the first line of the bill. What was previously "$59.99 + (fine print) $37 in assorted fees" now appears as a single number: "$96.99." While the actual total amount paid has not changed significantly, consumers are now confronting the true cost of their service for the first time.

This effect matters for two key reasons. First, it facilitates comparison shopping: with all-in pricing visible at a glance, consumers can immediately compare the cost of streaming services ($15–$25/month) versus cable TV ($100–$165/month). The Biden administration explicitly cited "promoting consumer comparison shopping and competition" as the rule’s purpose. Second, it triggers sticker shock: seeing the full total displayed as a single line each month accelerates the decision that "for this much money, I could subscribe to multiple streaming services." In a Consumer Reports survey, 51% of Americans reported that hidden telecom fees had caused them to exceed their budget, while 68% said hidden fees had increased compared to five years earlier.

In sum, the All-In Pricing rule did not raise prices—it made the already-high costs transparent, serving as a psychological catalyst that accelerates migration from pay-TV to streaming and FAST services.

U.S. Pay-TV Bills: Surpassing $1,600 Per Year

Rising U.S. pay-TV prices are the most direct driver of cord-cutting. Key data points paint a stark picture.

According to JD Power’s Q1 2025 survey, the average monthly cable and satellite TV bundle fee reached $187.99, up $7.69 from October 2024.

A Reviews.org report on consumer media spending in 2025 found that cable TV costs rose 14% year-over-year to an average of $101 per month, making traditional cable/satellite TV the most expensive media spending category. The same report found streaming service costs rose 22% year-over-year to an average of $51.71 per month.

According to Cord Cutters News, the average U.S. cable TV bill in 2025 is approximately $108 per month, with 41.6% of respondents reporting they pay more than $151/month. Regionally, subscribers in major metros like New York and California pay over $160/month, while rural areas average around $95.

Mountain Research analysis found that of the approximately 200 channels included in an average cable package, viewers actually watch only 15—meaning 92% of channels go unwatched. Consumers spend approximately $1,618 annually on channels they never view. The per-channel cost has risen 52% in three years, from $0.50 to $0.77—three times the rate of inflation over the same period.

Meanwhile, streaming services are also trending upward in price. As of 2025, subscribing to all major premium services—Netflix Premium ($24.99), HBO Max Premium ($20.99), Disney+ Premium ($15.99), Hulu ($18.99), and Apple TV+ ($12.99)—would cost approximately $140/month, approaching cable TV pricing. Live TV alternatives like YouTube TV ($75–$95/month) and Hulu + Live TV also occupy a cable-comparable price range.

Korea’s Pay-TV Market: Cord-Cutting Trends Mirroring the U.S., but with Structural Differences

Korea is not exempt from the cord-cutting trend. According to the Broadcasting Media and Communications Commission’s report on pay-TV subscriber figures released in November 2025, total Korean pay-TV subscribers (IPTV + cable TV + satellite) stood at 36.226 million, having declined for three consecutive half-year periods since peaking at 36.39 million in the second half of 2023. The pace of decline has accelerated: from 5,755 in H1 2024 to 19,964 in H2 2024 to 138,546 in H1 2025.

However, important structural differences exist between the Korean and U.S. pay-TV markets. First, IPTV plays a fundamentally different role in Korea, accounting for 59.1% of all pay-TV subscribers (21.41 million) and still growing (+100,000 per half-year). Losses are concentrated in cable TV (-180,000) and satellite (-60,000). The U.S. lacks a comparable IPTV growth engine. Second, Korean pay-TV pricing remains relatively affordable due to telecom bundling, meaning price pressure has not been the primary cord-cutting driver as it has in the U.S. However, KISDI analysis shows that streaming services are increasingly displacing pay-TV viewing time, gradually translating into subscription cancellations. Third, both markets share content fee disputes: Korea faces ongoing conflicts over terrestrial retransmission fees, home shopping carriage fees, and PP (program provider) content licensing fees—creating structural tensions similar to the U.S. retransmission fee cycle.

The Rise of FAST: A New Destination for Cord-Cutters

This trend aligns with the nationwide cord-cutting movement across the United States. Professor Kerry Rich of Wayne State University warned in a media interview that "not everyone has access to TV programming through broadband or the internet," cautioning that cable attrition could lead to diminished access to local news and emergency information.

A significant portion of subscribers leaving pay-TV are migrating to FAST (Free Ad-Supported Streaming TV) platforms such as Tubi, Pluto TV, Samsung TV Plus, and The Roku Channel. For consumers frustrated with expensive cable bills, free ad-supported models offer a compelling alternative. This underscores the growing strategic value of FAST channels as a global distribution pathway for K-content.

4. Strategic Implications for the K-Content Industry

First, the urgency of distribution channel diversification. If the Netflix-WBD merger is consummated, a single platform’s bargaining power in the global content market will be strengthened to an unprecedented degree. K-content producers and distributors must more aggressively pursue distribution diversification through FAST channels, independent streaming platforms, and regional platforms.

Second, preparing for U.S. broadcast ownership deregulation scenarios. If the 39% cap is abolished or significantly relaxed, mega-scale broadcast groups on the order of Nexstar could emerge. This would affect both the entry opportunities for K-drama and K-entertainment content in local broadcast programming and the pricing negotiation structure.

Third, managing the risk of content politicization. As the Netflix hearing made clear, U.S. Congress is increasingly using the ideological orientation of content as a variable in merger reviews. Korean content distributed through global platforms needs a proactive risk management strategy that accounts for this evolving political environment.

Fourth, seizing FAST market opportunities driven by pay-TV attrition. As the Michigan case illustrates, the acceleration of U.S. pay-TV subscriber losses is enhancing the strategic value of FAST channels as a new global distribution pathway for K-content. In a market where average monthly cable TV bills range from $108 to $188 and retransmission fees rise annually, consumer migration to free ad-supported FAST models is structural and irreversible.

Fifth, developing integrated strategies linked to Korea’s pay-TV market changes. With Korean pay-TV subscriber declines now accelerating, a fundamental redesign of content distribution strategy centered on streaming is inevitable. The U.S. retransmission fee vicious cycle offers lessons for Korea’s own terrestrial retransmission fee and PP content licensing negotiations. K-content companies must recognize the simultaneous structural shifts in domestic and international pay-TV markets and design their global FAST/OTT distribution and domestic pay-TV strategies in an integrated manner.

Alternatives to the Pay-TV Industry Decline

1. Mega-Mergers Among Cable Operators (Economies of Scale)

The most visible response is the $34.5 billion merger between Charter Communications and Cox Communications. The combined entity will have approximately 38 million subscribers, creating the largest cable operator in the United States. MoffettNathanson analyst Craig Moffett noted that "the reason Cox refused merger proposals for 20 years was Charter’s new bundling and packaging strategy’s potential for success." The two companies have virtually no geographic overlap, minimizing antitrust concerns, and approximately $500 million in annual cost synergies are expected to materialize within three years.

2. The Collapse of the Media Conglomerate Model: Legacy Asset Spinoffs (The Versant Model)

Comcast completed the spinoff of its cable network assets into Versant Media Group (VSNT) in January 2026. CNBC, USA Network, E!, Syfy, Golf Channel, and MS NOW (formerly MSNBC) became a separately listed company, while Comcast’s core business focuses on broadband, Peacock, and theme parks. Following the spinoff, Comcast’s stock rose 1.3% while Versant fell over 14% on its first trading day—a clear market signal that legacy TV assets face a pessimistic outlook.

WBD is similarly planning to split into a streaming/studios company and a global networks company by mid-2026. The underlying recognition is that "the media conglomerate model is over"—growth assets and declining assets must be separated to pursue optimal strategies for each.

3. Hybrid Bundling (Streaming Integration Packages)

Starting with its 2023 agreement with Disney, Charter has been pursuing a hybrid distribution strategy that bundles streaming services—Disney+, Max, Paramount+, Peacock—into cable video packages. Traditional pay-TV operators’ new strategy combines smaller, targeted, cheaper live channel bundles with SVOD bundling. The logic is a churn-prevention effect: "if you cancel cable, you lose streaming too."

US MVPD Subscribers and Penetration: 2023–2025 ©nScreenMedia, 2025

4. Explosive FAST Channel Growth (Free Ad-Supported Alternative)

FAST is experiencing rapid growth as the practical destination for cable defectors. NBC Universal Local’s Telemundo Station Group launched "Telemundo Puerto Rico," a free ad-supported channel offering 24-hour original news and entertainment from its WKAQ station, initially distributed on The Roku Channel for mainland U.S. audiences.

According to Nielsen, FAST services accounted for 5.7% of total TV viewing as of May 2025, exceeding the viewing share of individual broadcast networks. Tubi surpassed 100 million monthly active users (MAU) in June 2025, Pluto TV reaches approximately 80 million, The Roku Channel reaches approximately 145 million households, and Samsung TV Plus also exceeded 100 million MAU in January 2026. The global FAST market is projected to reach $17 billion by 2029.

5. vMVPD (Virtual Pay-TV) Growth

The only growth substitute for traditional cable TV is the virtual MVPD sector, led by YouTube TV (an estimated 9.4 million subscribers, with 750,000 net additions in Q3 2025 alone). There were approximately 20.5 million vMVPD subscribers at end of 2024, projected to grow to 24 million by 2027. However, at $75–$95/month, vMVPDs share cable-level pricing—a structural limitation.

6. Broadband-Mobile Convergence Pivot

The most fundamental strategic pivot for cable operators is the transformation "from TV company to telecom infrastructure company." Post-merger, Charter-Cox will command 69.5 million passings and 35.9 million broadband subscribers, becoming the largest ISP. Charter’s mobile service (Spectrum Mobile) already has 10.4 million wireless lines, and Cox’s 200,000 mobile subscribers represent significant growth potential. The core strategy is "convergence"—bundling fixed broadband + mobile + streaming into a single package.

7. Retransmission Fee System Reform Proposals

There are also calls for government-level reform of the retransmission fee system. The International Center for Law and Economics (ICLE) recently proposed abolishing the retransmission consent system entirely, arguing that broadcasters should be treated as ordinary content suppliers under copyright and contract law, and that cable operators should be permitted to negotiate with out-of-market affiliates to reduce costs. However, the potential weakening of local news funding remains the principal obstacle.

ICLE’s Proposal to Abolish the Retransmission Consent System

In its November 2025 report, ICLE proposed a complete elimination of the system, based on three core arguments.

First, the collapse of the bottleneck rationale: In 1992, cable was the only paid viewing pathway, justifying must-carry and retransmission consent. Today, broadcasters can distribute content directly via websites, apps, and streaming—"the economic justification for the bottleneck problem has collapsed." Second, blackout resolution: the recurring blackouts triggered by retransmission fee negotiation breakdowns (e.g., the two-week Disney/ABC-YouTube TV blackout) would be "inherently reduced if the mandatory negotiation framework is replaced by standard commercial contracts." Third, regulatory asymmetry correction: granting retransmission privileges exclusively to broadcasters while exempting streaming competitors is inequitable—broadcasters should be governed "by the same copyright law and voluntary contracts as any other content creator."

Allowing Out-of-Market Affiliate Negotiations

Under current rules, cable operators can only negotiate retransmission with stations within their service area (DMA). ICLE argues that permitting negotiations with affiliates in other markets would introduce price competition among broadcasters and drive retransmission fees down. However, the potential weakening of local news production funding is cited as the most significant obstacle. The NAB has strongly opposed the proposal, calling it "an extension of pay-TV operators’ long-standing strategy to artificially suppress retransmission fees."

Implications for Korea’s Regulatory Framework

The ICLE-style approach of allowing out-of-market affiliate negotiations to encourage price competition among broadcasters is predicated on the unique U.S. structure of hundreds of local affiliates distributed across four major networks—making it difficult to transplant directly to Korea’s single-network national broadcast system.

In Korea, disputes extend beyond terrestrial retransmission fees (CPS) to include program licensing fees charged by program providers (PPs) such as CJ ENM and JTBC. Terrestrial broadcasters’ per-subscriber retransmission fees have risen from 280 won in 2012 to approximately 500 won currently, and in February 2026, cable TV operators proposed a unilateral reduction formula for PP content licensing fees, triggering collective pushback from the PP industry. Given these structural bargaining power asymmetries, Korea requires specific institutional improvements.

These include: enhanced cost transparency (modeled on the FCC’s All-In Pricing rule); mandatory pre-notification and public hearing requirements for fee increases exceeding a set threshold (e.g., 10–15%); introduction of automatic contract extension plus final-offer arbitration ("baseball arbitration") to prevent blackouts; mandatory allocation of a portion of retransmission revenues to regional and public content production funds; and strengthened enforcement of the "contract-before-supply" principle for PP channel agreements.

Sources and References

Primary Sources: Congressional and Government Agencies

Senate Commerce Committee Hearing Notice — "We Interrupt This Program: Media Ownership in the Digital Age" (Feb. 10, 2026)

Senate Judiciary Antitrust Subcommittee Hearing — Netflix-Warner Brothers Transaction (Feb. 3, 2026)

C-SPAN Hearing Video — Netflix CEO Testifies on Proposed Acquisition of Warner Bros. (Feb. 3, 2026)

Michigan Public Service Commission (MPSC) — Status of Competition for Video Services Annual Report

Newsmax FCC Petition to Deny — Nexstar-TEGNA Merger Opposition Filing (PDF)

Broadcasting Media and Communications Commission (Korea) — H1 2025 Pay-TV Subscriber Figures and Market Share (Nov. 24, 2025)

Policyband D.C. Memo (Ted Hearn, Feb. 4, 2026) — Primary reference source for this analysis

Variety — Ted Sarandos Defends Netflix-Warner Bros Deal (Feb. 3, 2026)

CNN Business — Netflix antitrust hearing culture-war fight (Feb. 3, 2026)

The Hollywood Reporter — Ted Sarandos Goes to Washington (Feb. 4, 2026)

S&P Global Market Intelligence — Cord-cutting impacts retransmission fee revenue (Oct. 2025)

Bridge Michigan — Michigan cable subscribers fall below 1M (Feb. 4, 2026)

Reviews.org — State of Consumer Media Spending 2025 (Nov. 2025)

JD Power — Average TV and Wired Internet Bills Rise in Q1 (2025)

NAB Blog — Eliminating Ownership Cap Protects Religious Broadcasters (Feb. 4, 2026)

KISDI Media Issue & Trend — Domestic Pay-TV Subscriber Decline Trends and Outlook