News

NCTA: Stop Rate Probe

11/14/2008 7:00 PM Eastern

Federal Communications Commission chairman Kevin Martin came under attack last week from a cable industry upset about his latest effort to put alleged cable rate hikes under a microscope.

In a lengthy letter, National Cable & Telecommunications Association president Kyle McSlarrow called on Martin to abort his newest investigation, which involves looking at how cable operators are changing rates as they try to transform their analog systems into all-digital platforms.

McSlarrow called Martin’s effort “a broad fishing expedition” that “constitutes an abuse of the [FCC’s] processes.”

On Oct. 30, the FCC’s Enforcement Bureau opened a probe into whether cable companies are effectively raising prices by moving a handful of channels from analog to digital tiers.

“I completely disagree with the insinuation that somehow it’s harassing for the Enforcement Bureau to be investigating what’s occurring,” Martin told reporters last Tuesday. The Enforcement Bureau is run by a Martin appointee.

Martin is concerned that cable operators are moving channels to digital and then charging consumers to rent digital boxes to maintain access to the same number of channels. The FCC is also looking at whether cable operators lowered the price of an analog tier after channels had been removed.

Martin said cable could be using TV stations’ Feb. 17, 2009, transition to digital to get consumers to take steps they don’t need to take now.

“We certainly don’t want to see them using the DTV transition to confuse consumers that they’re going to have to switch from an analog package to a digital package. That is wrong,” Martin said.

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 make way for more HD content, video-on-demand services and faster Internet access. 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 as a convenience to subscribers who have not retired their analog TV sets.

In all, the FCC sent letters to 13 companies to determine whether they violated any FCC rules. They were: 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.

The FCC lost its authority to regulate cable rates in March 1999. Nevertheless, the Enforcement Bureau is seeking extensive pricing data going back to November 2006. It demanded responses within 14 calendar days.

According to McSlarrow, the FCC’s “dragnet” was unlawful, claiming it violated of the Paperwork Reduction Act and risked public disclosure of highly confidential programming contracts. He added that 14 calendar days to respond was an unreasonably short period.

“The allegation that the Oct. 30 letters were violations of the Paperwork Reduction Act is wrong,” FCC spokeswoman Edie Herman said. “Our action was clearly not a violation of the Paperwork Reduction Act because we did not ask broad, sweeping questions to get information from a large number of companies. Rather we asked a few companies about specific matters in response to complaints from customers of those companies.”

The FCC won’t release the complaints unless the cable operators file Freedom of Information Act (FOIA) requests.

But the FCC’s response time to FOIA requests is unpredictable. In June, Multichannel News filed a FOIA request to obtain Martin’s travel records, but the agency has refused to release them despite a generally applicable 30-working day statutory deadline.

In his letter, McSlarrow said the FCC’s probe wasn’t narrow because the 13 companies that got FCC letters of inquiry serve “more than 86% of the nation’s cable customers.”

Because the FCC failed to follow established guidelines in seeking to learn about cable’s migration to digital, McSlarrow said that the NCTA would “respectfully request that [the letters] be rescinded so that a more constructive discussion might occur.”

FCC spokeswoman Herman noted that cable operators that failed to respond could be punished by the FCC.

“It’s an official government request for information,” she said. “Refusal to meet government requests for information — were the cable companies to go that route — would be referred for enforcement action.”

September