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FCC: Cable Is Competitive

Agency Likely To Buck Opposition, Dereg Local Markets 5/18/2015 8:00 AM Eastern
TakeAway

The FCC appears poised to (rebuttably) presume all cable operators now face local market competition.

Federal Communications Commission chairman Tom Wheeler’ s efforts to give cable operators a break in the form of reversing the presumption against effective competition in local markets are getting plenty of pushback.

 

At press time, it looked as though the chairman would be sticking to his guns in the face of opposition from broadcasters and some congressional Democrats.

 

Under the current regime, which dates back to the 1992 Cable Act, a local franchise authority can regulate basic rates unless a cable operator can demonstrate that it is subject to effective competition.

 

With the rise of nationwide direct-broadcast satellite TV providers, that demonstration has become something of a pro forma exercise.

 

STELAR ADVICE

 

In the STELA Reauthorization Act of 2014 (STELAR) — the satellite legislation that passed last December — Congress told the FCC to take steps to streamline the effective- competition process for smaller cable operators. Congress gave the agency a June 2 deadline for doing so.

 

In March, the FCC proposed easing the process for all cable operators, large and small, by presuming that cable operators did have local market competition — primarily from Dish Network and DirecTV — unless a local franchising authority could prove otherwise.

 

The FCC pointed out that in the past two and a half years, it had not denied any effective competition petitions, granting all but four in their entirety and the other four in part. (See box.)

 

A cable lobbyist following the issue said there was no indication that the FCC was planning to back off from its proposal to give all cable operators a break, but pointed out the industry lives in “fluid” regulatory times.

 

The proposal was getting plenty of pushback last week as the deadline for circulating an item approached. But the item was expected by the end of the week, and expected to stick with reversing the presumption.

 

A dozen senators, including Democrats Ed Markey and Elizabeth Warren of Massachusetts and veteran cable rate critic Al Franken of Minnesota, tried to get chairman Wheeler to change course, saying that STELAR “was not intended, however, to relieve larger cable companies of any regulatory backstop against rising cable charges or failures to offer relevant local programming.”

 

Gordon Smith, president of the National Association of Broadcasters, told commissioner Michael O’Rielly the move would be illegal, exceeding Congress’s “limited” direction on the issue in STELAR.

 

The NAB also argued that the FCC’s granting all those petitions would not remove the responsibility to look at each market individually. “The success rate of self-selected cable operators who believed the facts of their franchise demonstrated effective competition says nothing about the state of competition in the thousands of other jurisdictions where the cable operator chose not to file such a petition,” the NAB said in comments to the FCC.

 

Some Hill Backing

 

Cable providers were getting some congressional support as well. Rep. Anna Eshoo( DCalif.) teamed with Republican Steve Scalise (La.) to say that reversing the presumption could save FCC time and resources, and thus taxpayer dollars, while actually allowing cable companies the flexibility to offer more consumer-friendly pricing.

 

One cable executive familiar with the FCC’s thinking, or at least that of the bureau staffers that have to process the petitions, said the agency has wanted to make the change for years: given that the petitions are virtually all granted, it is a poor use of people power. Given budget constraints, Wheeler has vowed to focus on a more efficient use of FCC staffers.

 

“When you put out a video competition report that says that every person has access to three video providers, and do that the last few years, the policy is all there,” the source said. “It has been a question of politics and broadcasters running up to the Hill.”

 

Five Marketplace Changes Justifying New Look at Competition

 

1. Given the 15% of subscribers threshold needed to establish competition in a market, Dish and DirecTV, at 26% of all multichannel subscribers nationally, alone have nearly double the requisite percentage.

2. In 1992, cable had a 95% share of multichannel subscribers. Today, it has a little over 50%.

3. In 1993, only a handful of markets had a choice of multichannel provider. Today, there is “dramatically increased competition,” including from satellite providers and telcos.

4. Since 2013, the Federal Communications Commission’s Media Bureauhas reviewed petitions affecting 1,433 communities, but has found a lack of that competition in only one-half of one percent.

5. Number of effective competition petitions granted in part or in full since the beginning of 2013: 228. Number denied: 0.

SOURCE: FCC

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