FCC Tees Up Program-Access Review

11/03/2006 7:00 PM Eastern

Washington, D.C.— The Federal Communications Commission is making plans to review its program-access rules, which generally require cable-system operators to sell their satellite-delivered networks to DirecTV, EchoStar Communications and other competing pay TV providers, a top aide to FCC chairman Kevin Martin said last week.

In the boldest possible outcome, the FCC could let some key rules expire after October 2007 so that, for example, Time Warner Cable wouldn't have to share CNN or HBO with its direct-broadcast satellite rivals.

The ability to withhold programming gives the owner leverage to demand license fees higher than otherwise allowable under FCC rules.

But retention of the program-access rules is likely because the FCC has routinely expressed concern — especially in reviewing media mergers — about the competitive impact of exclusive programming contracts, according to Paul Gallant, a media analyst with Stanford Washington Policy Research and a former FCC Media Bureau official.

“It's still a ways out, but I expect the [FCC] would extend the program access regulations beyond 2007,” Gallant said. “The [FCC] has shown a willingness over the years to prevent programming from being used as a competitive weapon by distributors that own programming.”

Getting With the Program
Key moments in the development of the program-access rules:
SOURCE: Multichannel News research
First move (1992): Congress forces cable to sell satellite-delivered networks to pay-TV rivals, hoping to spur satellite TV competition.
Five more years (2002): FCC extends rules until Oct. 2007
Rupert responds (2003): Murdoch's News Corp. agrees to comply with rules, to gain control of DirecTV.
No withholding (2006): FCC bans Comcast and Time Warner from withholding terrestrially delivered regional sports networks for six years.

The FCC last looked at the rules in 2002, one decade after program-access provisions were enacted as part of the Cable Television Consumer Protection and Competition Act of 1992. Congress mandated that cable companies license the programming of any satellite-delivered networks they own to ensure that the satellite-TV providers could gain access to content that would be too expensive for new entrants to duplicate.

Four years ago, the FCC examined the cable-programming market and concluded that it would not use its discretion to allow the exclusivity ban to expire. Instead, the FCC extended the ban until October 2007. Martin, who was just a commissioner at the time, voted for the five-year extension, though he said it was “a very close call.”

Agency rulemakings typically take a year to complete, explaining why the FCC is close to launching its new program access review.

During the 2002 review, the National Cable & Telecommunications Association called for elimination of the exclusivity ban, arguing that the effort to nurture satellite-TV providers into robust cable competitors had been achieved with the marketplace success of DirecTV and EchoStar's Dish Network service.

In 2004, Comcast put forward a proposal that would have foreclosed any provider with more than 10 million subscribers from relying on the program access rules, or any provider that itself distributed programming on an exclusive basis.

Although the law hasn't changed in 14 years, the program-access regime has in fact expanded beyond the original congressional design as a result of FCC-imposed conditions on cable and satellite TV mergers.

Comcast and Time Warner Cable can't withhold terrestrially delivered regional sports networks from rivals for the next six years under Adelphia Communications merger conditions adopted in July.

However, Comcast did manage to secure a waiver for its Comcast SportsNet Philadelphia. That regional sports network carries the games of National Hockey League's Philadelphia Flyers, the National Basketball Association's 76ers and Major League Baseball's Phillies. Comcast owns the Flyers and 76ers.

News Corp. — in order to take control of DirecTV in 2003 — promised to make its cable-programming services available on a nonexclusive basis for as long as the FCC's program-access rules remain in effect.

But this condition did not interfere with DirecTV's exclusive distribution of the “NFL Sunday Ticket” out-of-market pro football package.

Recent program disputes at the FCC have not only concerned distributor access to cable-affiliated channels but also with independent programmer access to cable systems.

In July, the FCC effectively ordered Comcast to carry Mid-Atlantic Sports Network, the cable home of baseball's Washington Nationals.

Just days later, the agency ordered Time Warner Cable to reinstate carriage of NFL Network on systems that were newly acquired from Comcast and Adelphia, because the operator failed to give subscribers at least 30 days' notice before dropping the channel.

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