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FCC: Cable Market Is Competitive

Divided Agency Reverses a Regulatory Presumption 6/08/2015 8:00 AM Eastern

WASHINGTON — After more than 20 years of requiring cable operators to play “Mother, may I” to get out from under basic-tier rate regulation, a divided Federal Communications Commission has freed cable operators from that procedural burden and cost, primarily thanks to the rise of satellite- TV competition.

 

That will save cable operators of all sizes from having to expend the time and money to ask for the agency for rate-regulation petitions — petitions it has not denied in several years.

 

The decision was a victory for cable operators and a smackdown for broadcasters. TVstation owners had argued that a parade of horribles — such as higher prices and moving broadcasters and public, education and government (PEG) channels off the basic tier to more expensive packages — was sure to ensue. Three of the five FCC members were unpersuaded that any of that was going to happen.

 

BIPARTISAN EFFORT

 

But FCC chairman Tom Wheeler needed two Republican votes to reverse the effective competition presumption for all cable operators, as the agency’s other two Democrats suggested that with the move, the FCC had exceeded its congressional directive.

 

That directive, which came in the STELAR satellite-TV license reauthorization bill approved at the end of last year, was to produce an order by June 2 to streamline the effective competition process for smaller, especially rural, operators.

 

The FCC majority looked at the changing competitive landscape — satellite-TV now comprises more than 30% of the U.S. pay TV market, while cable’s market share is down from 95% when the Cable Act was passed to a little over 50% at present — and decided to kill two birds with one order. The agency’s order streamlines the petition process for all operators, while preserving a rebuttal mechanism for local authorities, though the FCC suggested that would be a hard case for most cable franchisors to make.

 

Wheeler may argue there is not sufficient broadband competition, but the order he circulated and that was approved last week said that when it comes to traditional video, the threshold has generally been met.

 

“[C]ompetitors have garnered far in excess of the market share Congress deemed necessary to free cable operators from the vestiges of rate regulation,” the order said.

 

The FCC treated the order as a procedural change, not as one that opens the barn door to price increases and moving broadcasters off the basic tier — the result predicted by broadcasters . Wheeler made that point in his statement, which read like an argument from the cable lobbyist he once was.

 

“[O]ur most recent report on cable industry prices concludes that the average rate for basic service is lower in communities with a finding of Effective Competition than in those without such a finding,” he said. “This is not surprising, since competitive choice is the most efficient market regulator. Similarly, there has been no evidence in this proceeding to suggest that our previous findings of Effective Competition in thousands of communities led to any changes in the tier placement of local broadcast stations.”

 

Broadcasters argued that MSOs were waiting to make those moves en masse, but the FCC was unconvinced.

 

“Despite widespread findings of Effective Competition, commenters have not pointed to a single instance in which cable operators have even attempted to move broadcast stations or PEG channels off the basic service tier. [The National Association of Broadcasters] argues that cable operators may not have moved broadcast stations or PEG channels to a higher tier in communities with a finding of Effective Competition at least in part because they do not wish to do so on a fragmented ‘patchwork’ basis, but they have provided no support for this assertion. Moreover, a patchwork of communities with and without Effective Competition will continue to exist after the adoption of this Order if any franchising authorities are able to rebut the new resumption and remain certified.”

 

The decision does not affect franchise-fee collection, PEG channel provisions or customer-service standards, Wheeler said.

 

ROOM FOR REBUTTAL

 

Franchise authorities can still file petitions to rebut the presumption; cable operators would then have to produce evidence to refute such a claim. The FCC doesn’t anticipate that many of those franchise authorities can make an initial case, and assumes petitions would be dismissed before cable operators needed to do anything.

 

In their dissents, Democratic commissioners Jessica Rosenworcel and Mignon Clyburn said they could not support expanding the STELAR mandate to all MSOs because it unnecessarily exceeded the FCC’s congressional directive.

 

According to a source familiar with the majority’s thinking, the idea was that if a market is competitive, it is competitive for operators large and small.

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