News

FCC Likely to Renew Program Access

6/02/2002 8:00 PM Eastern

Big cable's decade-old effort to torpedo the program-access rules likely comes to an end next month when the Federal Communications Commission is expected to extend the rules perhaps for another four years.

According to agency and industry sources, the FCC is expected to vote at its June 13 meeting to extend the rules at least until 2006. That date coincides with the sunset of a law that bans TV stations from signing exclusive retransmission consent deals with cable operators or direct-broadcast satellite carriers.

Under the program-access rules, cable operators are required to sell their satellite-delivered programming to multichannel video competitors, such as satellite giants EchoStar Communications Corp. and DirecTV Inc.

The rules were the brainchild of Rep. Billy Tauzin (R-La.) and flowed from program-sharing mandates that Tauzin fought to insert in the Cable Television Consumer Protection and Competition Act of 1992.

Tauzin claims the program-access law and associated rules were instrumental in the creation and rapid growth of the DBS industry, which now boasts 18 million subscribers, or about 20 percent of the U.S. pay TV market.

EchoStar and DirecTV were vocal proponents for extension, claiming they could lose access to 45 cable-affiliated networks, including such marquee brands as CNN, Discovery and Home Box Office.

The cable industry argued back that EchoStar and DirecTV have grown so big, so quickly that programmers would not easily give up access to 18 million DBS subscribers in exchange for cable exclusivity.

"The rules become less and less important as [DBS] gets bigger and stronger. My guess is that in a couple of years this becomes a hot issue," said The Carmel Group satellite and cable analyst Jimmy Schaeffler.

FIBER LOOPHOLE

The DBS industry called on the FCC not only to preserve current program-access rules but also to extend them to cable-owned networks that are delivered terrestrially via microwave and fiber optic cable.

It was not clear last week whether the agency was willing to broaden the rules. In the past, FCC officials have indicated that the agency lacked the statutory authority to include terrestrially delivered networks.

This issue came to a head a few years ago when EchoStar and DirecTV failed to obtain access to Comcast SportsNet in Philadelphia, a terrestrially-delivered regional sports network owned by Comcast Corp. Ruling on complaints filed by the satellite firms, the agency backed Comcast in its refusal to sell to DBS.

Publicly, the cable industry clung to its position that the program-access rules should sunset in part because cable operators no longer have a lock on programming.

In 1994, 53 percent of national cable networks were owned in whole or part by cable operators; in 2001, 26 percent were cable-owned. The National Cable & Telecommunications Association also pointed out that the 73 cable-affiliated networks in 2001 about equaled the number of cable-networks affiliated with CBS, NBC, ABC and Fox, which as broadcasters are not covered by the program-access rules.

Privately, the NCTA did not apply a lot of lobbying heat at the FCC for elimination of the rules, mainly because FCC leaders dropped several hints in recent years that they were not inclined to rattle the status quo.

"It's just one of those things. If it ain't broke, don't fix it. There is not enough pressure to drop them right now. Why rock the boat?" Schaeffler said.

SMALL OPS FAVOR

While the large cable operators pressed for a program-access sunset, small cable operators allied with the DBS industry in seeking their extension. The American Cable Association, which represents 900 small cable companies, said the rules protect the small companies from exclusive programming contracts that could be used by large cable operators to siphon off subscribers from competing small operators or to obtain lower prices for small systems that might be acquisition targets.

"If the FCC decides to extend the rules to 2006, our members would be very pleased with that result because that in fact is what we advocated," ACA president Matt Polka said. "Without certain access to programming from the vertically integrated providers, that would significantly negatively impact small businesses but also threaten their ability to provide advanced digital and data services. I think that point is coming through loud and clear."

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