CABLE WANTS FCC TO ACKNOWLEDGE COMPETITIVE MARKETPLACE

Bundling strategies that pit cable companies against DBS companies and their partner RBOCs in the race to provide video, voice and data are evidence of “the intensity of the competitive rivalry” in the video provider marketplace, NCTA said in comments to the FCC. Cable implored the FCC to acknowledge that a “vigorous rivalry” exists between cable and DBS, as satellite has continued to erode cable marketshare, from 91% in 1995 to 73% today. NCTA said DBS companies are forming alliances with RBOCs to offer Internet and telephone service, and DBS has grown to more than 23% of the market. Comments were due Fri. in the FCC’s annual assessment of the status of competition in the delivery of video programming.

A declaration by the FCC that the market is highly competitive could have an impact on how cable is regulated. The information is sent to Congress each year by the FCC in a report and a highly competitive market could potentially face a looser regulatory environment. NCTA told the FCC cable video also faces competition from DVDs and broadband Internet content, including online movies. NCTA said cable has invested in national, regional and local video networks, while rivals DirecTV, EchoStar and new entrant VOOM started by Cablevision have “developed virtually no exclusive original programming outside of bidding on sports rights.”

Satellite interests said effective competition doesn’t exist in all areas. EchoStar said the lack of effective competition is demonstrated by cable’s “runaway price hikes” and competitors “are still not disciplining cable prices regardless of whether these competitors are experiencing healthy growth.” SES Americom said more orbital and spectrum resources would help satellite operators to provide more competition. EchoStar said advanced service offerings, like satellite broadband, were also hindered by bandwidth. Both companies mentioned the ongoing proceeding on reduced orbital spacing for DBS birds. In addition to reduced spacing, EchoStar proposed allowing co-primary usage of the 28.6-29.1 GHz and 18.8-19.3 GHz bands by geostationary satellite orbit (GSO) and non-GSO fixed satellite service satellites.

EchoStar said the CARS spectrum band “would be well- suited to a ubiquitously deployed consumer service,” but a proceeding hasn’t been opened at the Commission on that issue. Voluntary a la carte offerings among program vendors would also help competition, EchoStar said, as would more proactive enforcement of the program access and retransmission consent rules. A la carte is anathema to the cable MSOs, which say govt.-mandated a la carte would result in higher prices and fewer choices for consumers.

DirecTV said competition is threatened by the terrestrial loophole that allows cable operators to launch cable-only networks. DirecTV said both Comcast and Cox have regional sports networks that are available only to cable operators and that plans “are rumored to be in the works” to withhold other sports teams in other cities. While Cox “loudly worried that News Corp. and DirecTV… could harm cable operators by withholding this same sort of programming. Plainly, the potential for harm is far greater where, as here, the withholding party is affiliated with a dominant distributor such as Cox.” The Satellite Bcstg. & Communications Assn. (SBCA) said multicast must-carry would also be a problem for DBS if adopted, due to limited spectrum: “Inclusion of DBS in such a regime could require DBS to cease transmission of large amounts of local-into- local programming.”

Struggling overbuilder RCN, which is in the midst of Chapter 11 bankruptcy, painted a picture of “regulatory gaps and loopholes” that allow impediments to competition, including issues with program access, rates and conditions, the terrestrial loophole, alleged predatory pricing, access to essential poles, ducts, conduit and wiring in multi- dwelling units. “Wireline competition is consumers’ best hope for improved service quality, greater choice, and lower prices,” RCN said. A GAO report found that in the few places where wireline competition exists, cable prices are as much as 15% lower.

Verizon called upon the Commission to establish a deregulatory national broadband policy and to reform certain aspects of video regulation. Contending that cable dominates both video and broadband, Verizon said “the elimination of asymmetrical rules imposed only on telephone companies is critical to the widespread deployment” of new broadband and video services. Verizon said it’s poised to offer a competitive alternative to traditional cable video service. The company said it expects to deploy fiber-to-the-premises (FTTP) technology that would allow video in parts of 9 states, including Cal., Fla., and Tex., by the end of the year. Verizon asked that the FCC treat FTTP like cable modem service at least on an interim basis until the pending rulemaking proceedings have been finished. Verizon also asked the FCC to encourage regulatory reforms at the state and local level and to close the terrestrial loophole. Lastly, Verizon asked that the FCC support open technical standards that don’t favor cable over satellite or FTTP technologies.

SBC said a continuous rise in cable rates above the Consumer Price Index stands in stark contrast to other telecom services. Wireline competition would help discipline cable prices, SBC said. But LECs have only made limited progress in entering the video market, SBC said, though it said it’s planning to provide FTTP in new or “greenfield” housing developments and fiber-to-the-node (FTTN) in existing neighborhoods. “Whether the regulatory and investment climate will favor a robust and successful video play remains to be seen,” said SBC. The company said deployment of FTTN will cost $4-$6 billion over the next 5 years. SBC said LECs can’t take the risk unless they can compete for “the full revenue stream” that the fiber-based network offers.

The National Telecom Cooperative Assn. (NTCA) said changes are needed to increase competition in rural areas. Access to programming, tying arrangements and exclusivity are all problems for small operators, NTCA said. The National Rural Telecom Cooperative (NRTC) said the cable industry has “vastly overinflated” the number of homes passed, “creating a false impression of MVPD competition in many rural areas.” The Commission should confirm the actual number, NRTC said. NRTC, an investor in WildBlue Communications, said it and other Ka-band satellite services should help in achieving universal broadband deployment. NRTC wants Congress to renew SHVIA, and the FCC to continue to ensure carriage of local broadcast signals by DBS providers.

Paxson said the most important competitive issue facing the market is DTV must-carry. Ensuring that broadcasters remain competitive “positively requires that cable operators be required to carry broadcasters’ full digital signals, including multicast program streams, and that satellite providers’ carry-one carry-all obligations extend to broadcasters’ full digital signals.”

CEA told the FCC that digital broadcast channels need to be promoted more aggressively during analog broadcasts and in TV program listings. It said it’s conducting many programs to increase consumer awareness and “now is the time for broadcasters to increase their efforts as well by running public service announcements and similar promotions.” Commercial broadcast stations should run at full power and cable operators must support digital cable ready integrated TV sets with adequate stocks of CableCARDS, CEA said.

Comcast said it’s facing stiff competition from DirecTV, which is now controlled by “global media powerhouse News Corp.,” as well as DBS alliances with Bell companies. Comcast said HDTV content on DBS continues to attract market share. The govt. should “take pains not to hobble marketplace participants -- or to skew marketplace competition -- with outdated or otherwise unnecessary regulator burdens,” Comcast said. Pointing to the entry of U.S. Digital TV, a low cost entrant in Albuquerque, Salt Lake City and Las Vegas, Comcast said the flexibility of the digital broadcast spectrum has given rise to this new form of broadcast TV, also posing a threat. Fox Cable Networks Group said bundling is necessary to keep license fees low and the “imposition of an a la carte or themed tier programming regime would threaten diversity and result in higher prices.”

The American Cable Assn. (ACA), which represents small and rural cable operators, said problems include restrictions imposed by media conglomerates, including tying arrangements, and what it called price discrimination. Although ACA said pure a la carte isn’t the answer, allowing flexibility for smaller cable companies to package channels for local markets and the elimination of pricing discrimination would go a long way toward solving the problems, ACA said. It complained of nondisclosure provisions in contracts with big programmers and fear of retaliation. ACA wants changes to retransmission consent, program access and antitrust laws. It called on the FCC to enforce a section of the law that prevents unauthorized transfers of control of retransmission consent rights and to amend network nonduplication and syndicated exclusivity.

The National Assn. of Telecom Officers & Advisors (NATOA) and the Alliance for Community Media said incumbent cable operators are “engaging in a range of anticompetitive practices to thwart competition,” including “predatory pricing, targeted rate discrimination, denial of access to content, denial of access to customers, refusal to deal with contractors and suppliers, destruction of property, and an assortment of other unfair practices.” NATOA said cable operators deploying digital TV are “routinely violating Cable Act rules on charging equipment fees without regard to actual costs and are ignoring the Commission’s tier buy-through- regulations.” The FCC should curb these practices, NATOA said.