FCC GIVES SATELLITE ANOTHER 5 YEARS OF ACCESS TO CABLE PROGRAMS

June 14, 2002 |Miscellaneous

FCC extended for 5 years rule enacted by Congress in 1992 that prohibits cable operators from withholding their own programming from their competitors, particularly satellite rivals. While decision wasn’t unexpected, it also wasn’t without dissent. Vote was 3-1, with Republican Comr. Abernathy voting against it. Chmn. Powell, who also is Republican, said that despite growth of competition in multichannel video marketplace, cable industry held 78% of market and thus remained “phenomenally concentrated” and must be looked at by regulators with “a scrutinizing eye.” He said increased concentration of media companies and efforts by those companies to cluster their systems “increase the probability of some forms of anticompetitive behavior that the government has an obligation to watch.” Powell said cable had demonstrated ability to exert undue influence over programming market. Cable critics had argued -- and he apparently agreed -- that large media companies could make it difficult, if not impossible, for upstart programmers to gain viability through carriage and that such large companies could drive down programming prices artificially. Powell said he was “convinced there remain both the incentive and ability to act in an anticompetitive manner” and that while healthy competition had developed, it hadn’t reached level at which he believed cable wouldn’t try to defeat competition through exclusive contracts with affiliated programmers.

Abernathy said ban no longer was “necessary” as defined by 1992 Cable Act and free market could do job without govt. interference. Decade-old ban had been set to expire Oct. 5, but Congress said FCC could decide whether it still was “necessary” to preserve competition and diversity in market. Abernathy said Congress had adopted statute in 1992 because at that time, cable operators had more than 95% of market and DBS operators were just emerging, and that most of programming networks were vertically integrated with cable operators. Today, DBS holds 18% of market and there’s substantially less vertical integration of programming networks and cable operators, she said. Describing ban as “artificial regulatory constraint,” Abernathy said she believed it actually harmed competition. She also pointed to recent court decisions overturning FCC rules based in part on notion that those rules no longer were necessary. “I believe that eliminating this prohibition likely would foster the development of new, innovative services that allow competitors to distinguish themselves and provide additional value and services to consumers,” she said. Comr. Martin voted to extend ban but said he believed phrasing by FCC’s staff should have been more responsive to recent court rulings. He said he approached issue with presumption that ban should sunset and fact that it might promote competition or be “beneficial” was not enough to keep it. Nevertheless, he said “on balance” he concluded that ban remained necessary to preserve and protect competition and diversity. “For me, this was a very close call,” he said. Lone Democrat on Commission, Copps, voted to extend ban, saying statute applied expressly to “satellite cable programming,” which meant FCC didn’t appear to have discretion to extend it on terrestrially delivered programming: “It is not clear whether, in adopting the language of this provision a decade ago, Congress anticipated the distinction between satellite- delivered programming and terrestrially delivered programming, or that local programming would be exempt from this prohibition.”

Decision to extend ban came as blow to cable industry, which had argued that tremendous growth of competition between cable and satellite since 1992 warranted lifting ban. Earlier this week, U.S. Appeals Court, D.C., affirmed FCC ruling that denied EchoStar access to regional sports programming produced by Comcast (CD June 13 p1). In that case, Comcast delivered programming terrestrially, saying it was more cost effective to do so than to offer it over satellite. FCC’s access rules apply only when cable’s programs are delivered via satellite network. FCC agreed with Comcast’s argument, and FCC Media Bureau Chief Kenneth Ferree said Thurs. that terrestrial loophole would remain in effect. Only reason Commission would step in, he said, would be if cable operator suddenly moved programming off satellite to terrestrial network in effort to evade access rules.

NCTA Senior Vp-Law & Regulatory Policy Dan Brenner said ban was unnecessary because rigorous competition today “assures that the vast majority of programming, whether owned by a cable operator or not, would be available to all distributors.” He said eliminating rule this year, however, would have restored limited exclusivity “to be used to differentiate competitive offerings.” Cablevision spokesman said Comr. Abernathy’s comments were most reflective of today’s market. “The FCC decision ignores the healthy video competition that exists today and creates a disincentive for cable companies to develop and invest in new programming,” he said. However, American Cable Assn. (ACA), which represents small and rural cable operators, said program access rules were necessary to keep larger operators from destroying smaller ones. “Without these rules in place, consumers in smaller and rural markets faced the prospect of losing important programming they watch daily, and independent cable businesses faced losing key services that help them keep competitive against DBS,” ACA Pres. Matthew Polka said.

Media Access Project (MAP) hailed FCC’s decision, saying Commission recognized that “the dominant cable companies can still crush would-be competitors by abusing their market power.” MAP said it hoped that FCC would keep that in mind while examining its other rules, including limits on media ownership. Satellite Bcstg. & Communications Assn. Pres. Andrew Wright said his group was pleased FCC had extended rules but disappointed that Commission concluded it didn’t have authority to close terrestrial loophole. “The loophole has allowed some cable companies in markets like Philadelphia to evade congressional intent that vertically integrated programmers be required to sell their programming to all [multichannel video program distributors] on a fair and nondiscriminatory basis,” he said. Wright called on Congress to close loophole.

Commission will review ban again before 5th year is up, Ferree said. Decision doesn’t stop Commission from granting waivers on case-by-case basis that would allow exclusive agreements if they served public interest. -- Brigitte Greenberg

FCC Meeting Notes…

Commission voted unanimously to issue its 9th annual Notice of Inquiry (NOI) on status of competition in market for delivery of video programming. Notice is designed to help FCC gather information, data and comments for its 2002 Competition Report to Congress. Commission is asking parties to provide information on consumer choices in programming and access, prices for programming and equipment, and for variety of services, including HDTV. NOI also seeks information on numbers of subscribers, service options, financial information on each industry, ownership information, data on investment in plant and upgrades. FCC wants information on provision of high-speed Internet access, telephony, video-on- demand, interactive TV. Comr. Martin said he was particularly pleased that Media Bureau staff this year chose to include questions on broadcasters.

FCC voted unanimously to issue Notice of Proposed Rulemaking (NPRM) that would update Commission’s cable rate regulations to reflect fact that it no longer had jurisdiction over cable programming service tier (CPST). Telecom Act of 1996 ended regulation of CPST rates after March 31, 1999. Commission’s rate regulations and rate forms were adopted when rates for basic service tier (BST) and CPST were regulated. Notice seeks to improve regulations for BST and associated equipment, but asks for comments and proposals for broader changes. Commission also clarified that it would review appeals of rate orders associated with channel changes by local franchising authorities while this proceeding was pending. FCC said it would use its rules already in effect to review channel changes. It said it would review appeals on rate adjustments for channels moved to BST before and after sunset of CPST.