News

A La Carte Off FCC Agenda?

7/18/2008 8:00 PM Eastern

If Federal Communications Commission chairman Kevin Martin is planning to overhaul the economics of the cable business in the near future, he is keeping it a well-guarded secret.

Martin recently dismissed rumors that the FCC was going to vote in late August on rules designed to impose wholesale a la carte mandates on cable programmers. “There isn’t anybody in the commission that’s working on the issue,” he told reporters on July 11. “I’ve had the Media Bureau staff working on different issues.”

Demand that any programmer seeking 75 cents or more wholesale could be stripped from expanded basic by MSOs.
Require wholesale unbundling, with reasonable rates, terms and conditions enforced by the FCC through a complaint process.
Require programmers to adopt a single license fee structure so that small cable operators pay the same as Comcast and Time Warner.
Insist on the separation of TV station and cable network carriage negotiations.
Contracts terms reviewed by FCC for verification
SOURCE: FCC; Multichannel News research

The FCC is planning to meet Aug. 1 in Washington for its monthly open meeting. Martin has tentatively scheduled a second meeting for Aug. 22, perhaps conducted by phone to accommodate vacation schedules.

For now, it appears that an August vote — when many of Washington’s most powerful officials will be away on vacation or on work-related travel — isn’t going to happen.

“There isn’t anything being drafted,” Martin said. A top aide also stressed that cable a la carte is inactive at the FCC.

Since becoming chairman in March 2005, Martin has put heat on the cable industry about prices and packaging. He has demanded that operators and programmers voluntarily allow consumers to buy channels one at a time, but the request has been ignored.

Instead, Comcast and Time Warner Cable rolled out family tiers to mollify Martin and groups like the Parents Television Council that complain about indecent cable content.

In September 2007, Martin moved in a new direction on cable a la carte. He decided that the FCC needed to examine the relationship between programmers and operators at the wholesale level.

That prompted Martin to propose rules that would require programmers to wholesale channels on an individual basis and stop the practice of bundling channels in a package offered on a take-it-or-leave-it basis.

Martin’s proposal was “a reaction to a breakdown in the marketplace,” said Matt Polka, president of the American Cable Association, a group of small cable operators that supports FCC intervention against large programmers.

Martin is a Republican appointee of President Bush. If he intends to leave office with Bush in January, he has a limited period in which to pass cable a la carte rules in some fashion.

The fact that Martin said his staff is not working on such rules could have been a sign that he won’t use what little time he has left to trigger one more battle with cable on his way out the door.

Asked when he personally wants the commission to adopt a la carte rules, Martin said, “I don’t know.”

Blair Levin, a media and telecommunications analyst at Stifel, Nicolaus & Co., issued a report last week indicating a fourth-quarter timeframe for FCC action, but the report didn’t detail specific policies that could emerge.

The a la carte issue has media heavyweights trying their best to nullify Martin’s agenda. His opponents include Comcast, Time Warner, the Walt Disney Co., Viacom, News Corp., NBC Universal, all major sports leagues except the NFL, and the Hollywood studios represented by the Motion Picture Association of America.

On the other side are small cable operators joined by a diverse coalition that includes satellite carriers DirecTV and Dish Network, AT&T Inc., Knology/PrairieWave, RCN, and SureWest.

If Martin moves on the issue in the fall, it’s unclear what rules he would attempt to pass because he has shown interest in several ideas.

Earlier this year, he floated a proposal that would allow a cable operator to exclude from expanded basic any channel that demanded 75 cents per month per subscriber on a wholesale basis. A Martin aide indicated that the 75-cent plan (which Polka’s organization has never endorsed) was just a trial balloon that fell to earth.

Martin has also expressed interest in outlawing certain tying arrangements, including the practice of linking access to local TV signals to carriage of cable programming. Two weeks ago, Disney attempted to make this a non-issue by agreeing to give its ABC signal to 91 small operators within the 10 markets where it owns the ABC affiliate.

Another possibility is a rule that would require national pricing of cable networks, under which every cable operator would pay the same wholesale price for a cable network. ACA has pressed for this regulation, claiming that small operators pay higher license fees than big operators do for no demonstrable cost-based reason.

But national pricing — which is akin to widely used most-favored-nation clauses in programming contracts — would not address bundling at the wholesale level or a la carte choices for consumers at retail.

Polka, who met with Martin privately in April, said he isn’t sure where Martin would lead the agency. But he’s hopeful that the FCC will act before Martin heads for the exit.

“My hope is that this is something that moves,” Polka said. “Frankly, I think it’s something that the chairman would like to move. Obviously, he’s made it an important part of his chairmanship.”

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