CABLE BUREAU TURNS TO EXPERIMENTAL ECONOMICS IN ANALYSIS

FCC Cable Bureau will take novel approach in analyzing cable ownership rules, using experimental economic model to try to predict how cable operators and programmers would behave if ownership rules changed, Bureau Chief Ken Ferree said Wed. in press briefing at bureau. He said he and other Commission staff members still were “hammering” industry and public interest groups to produce data and analysis, but FCC staff members also would produce their own independent research examining cable horizontal and vertical ownership limits to supplement effort. Ferree said staff was “suspending judgment” on whether experimental economics would produce results, but said new “cutting edge” economic models had proved to be “very good science.” “Rather than sit around and theorize about what would happen in certain circumstances, you can model them and play out these experiments and see what would actually happen with different variables and varying conditions,” Ferree said. FCC staffer Paul Gallant said model was “widely accepted” among economists and outside experts were expected to be called in to aid effort.

Ferree said good research was critical if Commission’s eventual decision were to withstand judicial scrutiny. Commission still is smarting from decision by U.S. Appeals Court, D.C., in Time Warner v. FCC, which struck down 30% horizontal and 40% vertical ownership caps. Court said Commission did poor job of justifying its numbers (CD May 17 p8). Results of study using economic models are expected in about 3 months. Then, if study “looks like it’s anything that’s of value,” Cable Bureau will put it out separately for public comment, Ferree said. Effort is part of work of newly formed ownership working group (CD Oct 30 p4). He said proposed EchoStar-DirecTV merger wouldn’t complicate or hinder economic study.

FCC staff already has made series of recommendations on pending Notice of Inquiry (NOI) on cable open access and has had some feedback from office of Chmn. Powell, Ferree said: “We've begun drafting an item now. There are still a few issues outstanding that we're waiting for further direction from the Chairman’s office on, but we're pushing ahead.” He declined to predict what item would include, whether it would be rulemaking or other document or when it would be ready for consideration. Comr. Martin in recent days has questioned why item has lingered so long, but Ferree said his staff had been working feverishly on issue.

On proposed FCC reorganization, Ferree predicted Commission staff would have plan ready for vote either in late Nov. or in Dec. “We might be talking about actually doing physical reorganization the first of the year,” he said.