Montgomery County Push to Drop DBS from Effective Competition Could Have Broader Implications

Montgomery County, Md., is hoping to change some of the rules governing how the FCC frees cable operators from local rate regulation. It recently asked the Media Bureau not to grant a special relief request from Comcast that would free the cable operator from local rate regulation in some Montgomery County towns. Opposition from local franchise authorities to such requests by cable operators is not new. But Montgomery County argued the bureau should stop making findings of “effective competition,” based solely on competition from Dish and DirecTV (CD Dec 13 p23). That argument, if it holds up, could affect how other operators in areas where no wireline competition exists are able to seek similar local rate regulation relief.

The FCC’s “own cable pricing report shows that the rules are not working, and we think they ought to take this opportunity to ensure that rates are reasonable,” said Mitsuko Herrera, Montgomery County’s cable and broadband administrator. “The FCC’s own data shows that you need wireline competition to be effective for consumers,” she said.

Comcast’s response, filed with the FCC just before the holidays (CD Dec 26 P15), said the Communications Act compels the commission to consider DBS operators as effective competition. The relevant section defines “effective competition” as a case where a region is served by at least two unaffiliated MVPDs offering their services to 50 percent of households, where at least 15 percent of homes buy services from those other than the largest MVPD. “Based on these unambiguous statutory provisions, DBS competition must be considered in this proceeding,” Comcast said.

But Montgomery County points to another section of the law that requires the FCC to ensure the rates for basic tier cable service are reasonable. “The title of that section is Commission Obligation to Subscribers,” Herrera said. She said the issue could affect other jurisdictions and that others can participate in the proceeding. “It may set some precedent that sets some other things in motion,” she said.

The county made the request within an open effective competition proceeding, rather than as a separate petition for rulemaking, to increase the chances it would get the FCC’s attention, Herrera said. “What you have found in other instances where people have filed petitions on the general issues, they [the FCC] do not feel an obligation to respond to them,” she said. “What’s live before the commission is the filing Comcast has done, and we are responding in that proceeding."

Cable operators in further-flung regions often rely on DBS subscriber figures to get a finding of effective competition, said Eric Breisach, an attorney with Womble Carlyle who has represented cable operators. “If you're outside an area where you have telephone company video competition, you most frequently fall back on the dual provider test, and most frequently that’s triggered by DBS,” he said. “Outside of the very largest markets, you need DBS to be included in this test to have a shot at effective competition, in most cases.” Some exceptions are when there’s a traditional or municipal overbuilder operating, he said.

But the statute is clear on how such competing providers are defined, Breisach said. “The definitions they're seeking to have the commission change are all statutory,” he said. “DBS is an MVPD and the statute puts the dual provider test in terms of other MVPDs.”