Cable, Consumer Groups Clash Anew8/12/2005 8:00 PM Eastern
Washington— Cable companies and consumer groups have been fighting about ownership rules since the dawn of the Bush administration — that is, the administration of President George H.W. Bush that ended in 1993.
After a protracted, multiyear struggle on Capitol Hill, Congress passed a law in late 1992 that required the Federal Communications Commission to cap the size of cable companies and ensure cable carriage of channels not owned by cable MSOs.
As a result of court setbacks and bureaucratic inaction, valid FCC rules have been in effect for just a few months during the entire 13-year period, an era characterized by a series of cable-operator mergers that the federal government refused to block.
BACK ON FCC RADAR
But cable ownership is back on the FCC agenda. With a deregulatory mindset, former FCC chairman Michael Powell declined to push for new rules. Powell successor Kevin Martin, who took office in March, has different ideas, announcing in May that the agency would attempt to put new rules on the books and defend them in court.
Federal law requires the FCC to set “reasonable limits” on the number of subscribers served by a single cable company. It also also calls for a cap on the number of channels an MSO may fill with its own programming.
Last week, the FCC received comments on how to fashion new rules in both areas. Not surprisingly, the pattern established years ago hasn’t changed — cable wanting as few constraints as possible, consumer groups calling for tough action.
The National Cable & Telecommunications Association and Comcast Corp., filing separate comments, told the FCC that in today’s market environment, a rigid numerical subscriber cap would not pass court muster.
“It is difficult to see,” Comcast said, “how the [FCC] could … find a real and nonconjectural situation where a single cable operator can unfairly impede the flow of video programming sufficient to justify a cable ownership cap.”
Furious that the FCC has let a top-heavy cable industry emerge, Consumers Union, the Consumer Federation of America and Free Press in joint comments called for rules that would assign greater value to urban than to rural subscribers, apparently in an effort to break up markets and regions dominated by a single cable company — for example, Comcast in Philadelphia or Time Warner in Los Angeles, after its merger with Adelphia Communications Corp.
“Setting a meaningful horizontal limit on the national reach of cable operators based on an advertising market weighted measure of subscribers would be a major step in the right direction,” said the consumer groups, adding that their formula would require Comcast to sell 4 million subscribers and back away from the Adelphia deal.
The Media Access Project, a public-interest law firm that helped defeat Powell’s effort to relax broadcast-ownership rules, is planning to ask the FCC to cap one cable company at 25% of all U.S. pay-TV subscribers. That cap would force Comcast, at 29% after the Adelphia merger, to sell systems.
MAP attorney Harold Feld said that because he believes the FCC would never force Comcast to sell, MAP would not ask for retroactive enforcement.
“Given the commission’s reluctance to order divestitures, we don’t think divestures are likely,” Feld said.
It’s unclear how fast Martin wants to move. He may have to overcome political gridlock because the agency’s five-member leadership has been evenly divided between two Republicans and two Democrats since Powell’s departure. President Bush is expected to make new appointments in the near future to give Martin a one-vote GOP majority.
The FCC’s new cable-ownership effort is geared toward meeting statutory and First Amendment standards established by a three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit.
In March 2001, the panel tossed out the FCC rule that capped ownership at 30% of all pay-subscribers nationally. It also voided the FCC’s channel-occupancy rule, which said a cable company had to set aside 60% of its first 75 channels for unaffiliated programming.
In arguing against a cap, the NCTA said that in 1992, Congress was concerned that one or two cable companies with vast subscriber penetration would dominate the programming world in an anti-competitive manner.
With direct-broadcast satellite serving about 26 million subscribers and the Baby Bells about to crash into video, the NCTA said there is no justification for the fear that cable MSOs can “constrict the flow of diverse programming” to consumers. Therefore, the NCTA added, it wouldn’t be reasonable to limit the size of cable companies.
“Telco competition, like DBS competition, eliminates the need for ownership restrictions on cable operators because it diminishes the likelihood of discrimination against non-vertically integrated programmers,” the NCTA said.
The cable trade group added that because operators have added to their channel capacity while reducing, in percentage terms, their interest in cable networks, a channel-occupancy rule designed to assure carriage of unaffiliated programming was unnecessary.
The consumer groups outlined for the FCC a pay TV market dystopia ruled by cable operators, justifying the need for government intervention to protect consumers from rising rates and independent programmers from exclusion.
“In short, the failure to adopt a meaningful limit has harmed consumers and programmers,” the groups said, adding the FCC had “to address the fact that the current industry structure unfairly impedes the flow of independent programming.”