Should carriers be free to modify content?

From a legal perspective, I wonder if modifying content like this counts as producing a derivative work, which might possibly violate copyright law.

If I recall correctly, Blockbuster got in some hot water for censoring some of its videos and certain Hollywood directors did not appreciate it very much.

I suppose being "free to modify" would then depend on the consent of the content provider whose work is being modified.

Any lawyers in the crowd with insight on this?