Washington -- Cable competitors are cheering the arrival of
a new bill, sponsored by Rep. Henry Hyde (R-Ill.), which would shift the program-access
debate from the familiar world of communications law to the somewhat arcane world of
Hyde, chairman of the House Judiciary Committee, is relying
on a century-old law -- the Sherman Act of 1890 -- to eradicate exclusive contracts and
discriminatory pricing from the cable industry. It's the same law that
turn-of-the-century trustbusters used to dismantle John D. Rockefeller's Standard Oil
"This necessary update in existing antitrust law
creates a weapon to cure some of the ills facing emerging multichannel-video competitors,
such as wireless cable," said Andrew Kreig, president of the Wireless Cable
Association, in a statement.
Charlie Ergen, chairman and CEO of EchoStar Communications
Corp., the No. 3 direct-broadcast satellite company in the United States, pointed to the
bill's price-discrimination section as especially important.
"The rates that EchoStar pays for programming are
often significantly higher than those paid by cable companies," Ergen said in a
Bert Braverman, a cable attorney with Cole, Raywid &
Braverman, based here, said the Hyde bill was unnecessary because existing antitrust law
was adequate to challenge exclusivity and pricing arrangements of cable operators.
"The antitrust laws could be applied to any situation
that was perceived to be an abuse of market power," Braverman said.
Since passage of the 1992 Cable Act, Braverman added,
exclusive cable contracts have been almost eliminated. At the same time, DBS companies
have been reporting stellar increases in penetration. Given those facts, Braverman said,
there was no marketplace justification for the Hyde bill.
"What it tells you is that we live in a very political
world," Braverman said. "I think that is the only way that you can rationalize
The Hyde bill (H.R. 3559) is backed by Ameritech New Media,
the cable arm of Chicago-based Baby Bell Ameritech Corp., which has complained bitterly to
Congress about its inability to obtain cable programming owned by NBC and Viacom Inc.
While the cable industry has gotten used to enforcement of
program-access rules by the Federal Communications Commission, it is unprepared to deal
with a new antitrust law that could trigger time-consuming litigation, cable sources said.
Losing a case, moreover, could be costly: Cable operators
could be forced to pay triple damages and plaintiffs' attorneys' fees.
"I think that it's going to create enormous
uncertainty in the marketplace, if it passes," said a Washington cable lobbyist, who
asked not to be identified.
Under Hyde's bill, an exclusive contract between a
cable programmer and a cable operator with "market power" would be a presumptive
violation of the Sherman Act. If sued, a cable operator would have to bear the burden of
proving that the contract was not anti-competitive.
"It used to be that you were presumed innocent until
proven guilty. Now, you're presumed guilty until you prove yourself innocent,"
Although Hyde's bill would grandfather contracts
signed prior to enactment of the bill, going forward, it would effectively ban exclusive
contracts that are otherwise permissible under current communications law.
"There are a lot of exclusive contracts between MSNBC
and cable operators, Viacom and cable operators," a cable lobbyist said.
James Olson, chief of the FCC's Competition Division
from 1993 to 1997 and now an antitrust lawyer in private practice here, said Hyde's
decision to force cable operators to rebut presumptions of illegality would make it highly
unlikely that they would sign exclusive contracts in the first place.
"I would counsel against entering into such a
contract," Olson said. "The risks are quite high."
Although Olson said it would be almost clear-cut that an
incumbent cable operator had market power, cable lawyers and lobbyists that were
interviewed disagreed, saying that each market would have to be examined separately --
making compliance with the Hyde bill all the more complicated.
"It's going to be different in each jurisdiction.
The facts are different in New York than they would be in Missouri," a cable lobbyist
Olson conceded that cable operators would have chances of
winning antitrust cases in some markets, but he would still recommend to a cable-operator
client that it shun exclusive contracts to minimize risk.
The bill has a second feature, targeted toward the issue
highlighted by Ergen: price discrimination.
It would make any programming contract with a cable
operator that has market power presumptively illegal if the cable operator received terms
and conditions that couldn't be justified by "demonstrable cost
Conceivably, cable operators could pay less for programming
on a per-subscriber basis than DBS competitors. But the goal of the bill is to narrow the
gap to the smallest possible cost-based differential.
Nick Allard, a wireless cable lawyer with Latham &
Watkins, based here, said price differentials based on economies of scale would appear to
be immune from lawsuits under Hyde's bill.