FCC's Martin Digging for Legal Leverage

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Kevin Martin not only thinks that cable systems should sell programming by the channel in a menu of a la carte choices -- he’s also looking for legal grounds that could force the issue.

Federal Communications Commission staff are now looking into whether existing law provides any opening that could compel cable systems to adopt some form of a la carte pricing, according to an aide to chairman Martin.

Martin's staff -- in a preliminary way, the aide stressed -- is focused on a provision of the 1984 Cable Act that gives the agency discretion to “promulgate any additional rules that may be necessary to promote diversity of information sources.”

The FCC’s authority to adopt rules is tied to the penetration of high-capacity cable systems -- specifically, when operators with 36 or more channels pass 70% of U.S. households, and 70% of households passed by those systems are subscribers. “If you hit 70/70, other options become available,” the Martin aide suggested.

The FCC's look at the 21-year-old provision was an effort partly designed to debunk the widely reported view that the agency has no legal authority to impose a la carte on cable, the Martin aide said.

Before Christmas, the FCC is expected to reveal in its annual video-competition report whether the 70/70 test has been met.

In prior years, the agency has concluded that the first, but not the second, prong of the test had been met. In last year's competition report, the FCC concluded, “Subscribers to systems with 36 or more channels as a percent of the homes passed by such systems is 58.8%.”

In the past, the National Cable & Telecommunications Association has said that when both prongs of the 70% test have been met, FCC authority is restricted to regulating the rights of third parties to rent channels, also called leased access. The agency has not addressed its authority under section 621(g), said a Washington, D.C., cable attorney who asked not to be identified.

A Martin aide cautioned that a review of the 70/70 test was just starting. “Every year, we look at the 70/70 provision, and every year, the conclusion has been that we are not there yet,” the aide said.

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