Local Program-Access Fight Looms11/24/2002 7:00 PM Eastern
Over the next several weeks, a pitched battle will be waged here over a growing issue in local cable regulation: open-programming access.
All 14 of Los Angeles' cable franchises are now being renegotiated, and the city council here has expressed keen interest in crafting an ordinance that would bar operators from inking exclusive pacts with programming services — or, as some council members have put it, protect the diversity of voices.
Federal policy already bars operators from inking such deals. A Los Angeles city ordinance that's currently being studied would extend that nonexclusivity status to terrestrially delivered programming networks.
Though the ordinance is still in the research phase, operator reaction has been swift and succinct.
"It's fundamentally illegal," said Jeremy Stern of Cole, Raywid & Braverman, outside counsel to the local cable operators' association.
A list of the combatants, which surfaced before an ordinance was even completed, underscores the importance of quashing the issue early, from an operator's perspective. The Los Angeles Cable Operator's Association — representing Adelphia Communications Corp., Cox Communications Inc., Comcast Corp., Time Warner Cable and Charter Communications Inc. — has weighed in against the proposal.
Some influential local organizations — including the Motion Picture Association of America Inc. and the Directors Guild of America — have also expressed opposition.
Employing some of his elegant trademark turns-of-phrase, MPAA president and CEO Jack Valenti said in a letter to the city that such restrictions would "torture and prevent new and exciting business models being developed to offer motion pictures, as well as other programs and services available to residents through cable television systems, including Internet access, in the city of Los Angeles."
Rivals need it
Some Los Angeles officials believe open programming access is needed to curb the competitive edge that entrenched incumbents hold over new entrants.
Los Angeles saw its hopes of competition fade last year, when overbuilder RCN Corp. retrenched in the face of shrinking finances, and as another operator franchised to overbuild the entire city — Western Integrated Networks LLC — declared bankruptcy before stringing a single fiber.
Another competitor, Altrio Communications Inc., intends to overbuild one of the city's franchises, although executives have said the firm could expand elsewhere if it's successful with its first wave of systems in Los Angeles and its suburbs.
Second-to-market video providers have pleaded passionately to local authorities for aid in their battle against incumbents. At a recent meeting of the National Association of Telecommunications Officers and Advisors, overbuilder representatives argued that there is no such thing as a level playing field for competitors.
Research shows that 60 percent of the potential marketplace won't even consider a new service provider if the new company can't offer desirable local programming such as regional sports networks, the overbuilders told city officials.
"If you want competition, you're going to have to help it along," said Carolina Broadband Inc. CEO Bill Schueler, whose company could not get off the ground before its financing evaporated.
Operators also pointed fingers at a longtime rival: Verizon Communications Inc.
Experienced lobbyists for the Baby Bell — familiar with trying to open cable-modem platforms — mustered long-term allies to turn out to turn the tables on cable, which has fought for the phone company to open its platform.
During the San Francisco debate on open data access, Verizon — which has employees on the boards of many of the city's nonprofit organizations — rallied those groups to support the telco's goals, said Denise Brady, deputy director of the city's telecommunications department.
Lobbying reports showed $1 million was spent to promote open video access, Brady said.
"This is San Francisco; we're used to political activity. But my God, this was just absurd," she said of the daily protests. "I've never seen anything like that.
"We had a hard time figuring out who was who. Sometimes I think not even they were sure."
(In Los Angeles, too, open-data access supporters who showed up to testify also trouble answering simple questions. Some couldn't explain why they were so informed and concerned about the issue when they didn't even subscribe to cable TV, let alone high-speed data service.)
Cable operators said part of Verizon's interest is merely "competitive monkey-wrenching." But Verizon is also a reseller of DirecTV Inc.'s direct-broadcast satellite service, they noted.
Some municipalities have already taken the regulatory plunge. First into that pool was Montgomery County, Md., which added nonexclusivity language to its franchise agreements nearly 10 years ago. That terminology has become a template for authorities in such localities as Los Angeles and King County, Wash.
"Incumbents say they support competition, but when it comes down to welcoming the new entrant, it doesn't happen. You have to have something to keep them honest," said Montgomery cable communications administrator Jane Lawton.
Since the program-access language was added to the Montgomery franchise, it has survived five system transfers — the latest to Comcast Corp.
"Comcast is not crazy about having it," Lawton said.
Consultants who favor open-network access policies say cities need to act to fill a role abdicated by the Federal Communications Commission.
"Local regulators need to be the jurisdiction of last resort," said one consultant, who asked not to be identified. "Major media markets care about competition, because it supports diversity and grows the economy. Local governments need to step up, to the degree they are not pre-empted [by other authorities]. If they don't step up, no one will."
Antis stand firm
Cable attorneys are sticking with the legal merits of their case. Open-programming access at the local level is pre-empted by the federal Cable Act, copyright law, the First Amendment and other business law, they have argued.
Further, it's a solution in need of a problem, according to Stern. Altrio already competes against AT&T Broadband in Monrovia, he noted, offering a package of 223 channels — 141 of which are duplicative of AT&T's lineup.
Altrio offers 80 channels which AT&T doesn't carry, while the incumbent has 31 channels that the overbuilder doesn't offer. Thus, neither side can argue they can't get original programming, he noted.
The only truly exclusive programming pact in Los Angeles is the National Football League's "NFL Sunday Ticket" out-of-market pay-per-view package, offered by DirecTV and not sold to cable operators, according to Stern.
"To single out cable and allow DirecTV to continue the only exclusive package creates an irrational imbalance," Stern said.
The proposal will be subjected to multiple hearings, beginning with one before the ITA's board of commissioners. At that venue, operators and other entertainment groups will have a chance to convince regulators to abandon the legislation.