News

MSOs Respond To FCC Rate Investigation

11/14/2008 9:07 AM Eastern

Washington—The Federal Communications Commission is reviewing two years of cable rate information submitted Thursday by 13 companies threatened with monetary fines for noncompliance.

The agency, at the direction of chairman Kevin Martin, is examining whether cable operators violated any rules in connection with the migration of channels from analog to digital programming tiers, an industry practice developed years ago to make way for HD programming, video-on-demand services and faster Internet connections.

"All 13 companies have responded. We are reviewing the responses," FCC spokesman Robert Kenny said Friday.

In a letter Wednesday, FCC general counsel Matthew Berry warned cable operators to comply with the agency's 14-calendar day deadline to respond. The FCC sought the rate data on Oct. 30.

"Failure to do so will subject [the company] to appropriate enforcement action, including the imposition of forfeitures," Berry said.

Martin has the FCC looking at a number of rate issues, even though the agency lost its authority to cap cable rates in March 1999.

For example, he wants to know whether cable operators have moved channels to digital and then charged consumers to rent digital boxes to maintain access to the same number of channels.

The agency is also looking at whether cable operators lowered the price of an analog tier after channels had been removed.

The scope of the FCC's investigation was broad, seeking data back to 2006. Cable operators were particularly nervous about the FCC's interest in knowing the wholesale price of channels removed from the analog tier.

Comcast, for example, gave the FCC an overview of its digital migration policy but didn't provide a granular look at this programming contracts.

"There was not detailed programming cost information in there," a Comcast spokeswoman said. "After reviewing their request for information, we determined that it would have taken over 1,500 man hours just to compile the information for 2008."

Comcast excluded wholesale programming contract information from its FCC response.

"We stand ready to work with them and to see how best to proceed from this point. The amount of information was so substantial and the amount of time very short," the Comcast spokeswoman said.

Martin claimed cable could be using TV stations' Feb. 17, 2009 transition to digital to get subscribers to take steps they don't need to take now.

In reality, cable operators have a number of initiatives under way, both to get consumers past broadcasters' DTV transition and to reclaim old analog channels to meet intense consumer demand for advanced digital services, HD programming especially.

Comcast, the largest U.S. cable operator with more than 24 million customers, is charging new customers $10 a month for one year of basic cable or giving it away if they sign up for either high speed Internet access or digital phone service. When Comcast begins to switch an entire market to digital, its promotions include two free digital-to-analog adapters to convenience subscribers who have not retired their analog TV sets.

The FCC's Enforcement Bureau sent letters to Bend Cable Communications, Bright House Networks, Cablevision Systems, Charter Communications, Comcast, Cox Communications, GCI, Harron Entertainment, RCN, Suddenlink, Time Warner Cable, Midcontinent Communications and Verizon Communications.

National Cable & Telecommunications Association president Kyle McSlarrow called Martin's effort "a broad fishing expedition" that "constitutes an abuse of the [FCC's] processes ..."

McSlarrow called the FCC's "dragnet" unlawful, claiming it violated the Paperwork Reduction Act (PRA) and risked public disclosure of highly confidential programming contracts. He added that 14 calendar days to respond was an unreasonably short period.

The FCC is sensitive about allegations related to PRA violations. In July, the Bush administration's Office of Management and Budget held that new Martin-sponsored cable leased access rules violated the PRA.

Berry, in a letter to Bend Cable Communications, said the cable rate investigation was consistent with PRA, "contrary to the misinformation being disseminated by some in the cable industry."

Bend is being investigated in response to at least one consumer complaint in which it was named.

"To be absolutely clear, the investigation of Bend Broadband began as a result of a specific consumer complaint or complaints regarding Bend Broadband," Berry said. "As such, the [investigation] clearly does not violate the PRA because it was issued as part of a specific investigation of specific companies in response to specific consumer complaints."

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