Major phone companies, with support from DirecTV, Dish Network and lesser known pay TV providers, are pressing the Federal Communications Commission to expand their access to the stable of TV channels controlled by cable incumbents.
Cable operators today serve about 64 million pay TV homes, about twice as many as served by satellite-TV providers. But AT&T and Verizon Communications are just getting started in making their most serious attempt for video subscribers since passage of the Telecommunications Act of 1996, which swept away major regulatory hurdles that impeded telco entry.
Despite having legal guarantees to a vast array of networks owned by Comcast, Time Warner and Cablevision Systems, cable's rivals, are telling the FCC that the status quo isn't sufficient and it must use its authority to expand the reach of its program-access rules.
The cable companies are resisting, claiming the legal boundaries on the forced sale of programming should not be stretched at a time when video competition is thriving.
Cablevision went even further. It is recommending the FCC eliminate current requirements in markets where the cable company “can demonstrate it faces durable and substantial competition from other video providers.”
The program-access issue is tied procedurally to Federal Communications Commission chairman Kevin Martin's attempt to regulate the wholesale cable programming-acquisition market. Martin has not disclosed when he wants to bring the matter to a vote.
Generally, cable operators are required to sell their affiliated cable networks that are distributed to headends and other reception facilities via satellite. So far, networks sent around the country over ground-based systems have been excluded.
Verizon, based on access disputes with Cablevision Systems on Long Island, N.Y., is asking the FCC to amend the rules to include terrestrially delivered channels, arguing that such a change would provide automatic access to highly popular regional sports networks under Cablevision's control.
The ability to withhold programming due to the so-called terrestrial loophole, Verizon told the FCC in a Feb. 12 filing, would mean “incumbent cable operators will continue to move desirable programming to the terrestrial delivery platform to evade the program-access rules, thus undermining emerging video competition.”
Cable overbuilders such as RCN, Surewest Communications, Knology Holdings and WideOpenWest Internet support Verizon in demanding FCC-imposed access to now off-limits cable content.
DirecTV and Dish Network have for years been lobbying the FCC to include terrestrial programming without success. DirecTV has said that no access to Comcast SportsNet Philadelphia, an RSN owned by the cable provider, has depressed penetration 40% below trend. On prior occasions, the FCC has said that Congress intended the rules to apply to just satellite-delivered programming.
Verizon also brought to the FCC's attention a matter dealing with access to cable-controlled HD content. Verizon said it has no problem getting access to Cablevision's satellite-delivered channels in standard-definition digital, but it can't get the high-definition versions of the same programming because Cablevision's Rainbow Media Holdings has chosen to distribute HD content over ground-based networks, such as regional sports networks.
The FCC needs to ensure access to those HD feeds, Verizon said.
“This measure is necessary to ensure that competitive providers have a chance to compete effectively for the rapidly growing number of consumers that demand a robust selection of HD programming,” Verizon told the FCC.
The current rules expire in 2012 unless extended by the FCC. Comcast has argued, without success, that the program-access rules should remain off limits to any company with more than 10 million subscribers or more than $100 billion in market capitalization. Based on these criteria, DirecTV, Dish Network, AT&T and Verizon could not rely on the program-access rules.
Cablevision has called for a granular test, one less sweeping than Comcast's. Cablevision said it should have the right to petition the FCC for relief based on the intensity of local pay TV competition. A market-by-market test would reflect the fact some markets are more competitive than others and that the cable incumbent is, in some cases, a much smaller company than its competitors.
“Verizon and AT&T — which both compete with Cablevision in the New York [market] — enjoy a combined market capitalization exceeding $360 billion, over 40 times larger than Cablevision,” the operator told the FCC in January.