Kevin Martin Gets a Cap


Kevin Martin lost his most recent jihad against cable, having tried to cook the books about how many households subscribed to its pay television services.

The Federal Communications Commission chairman needs to save some face somehow, after the recent debacle where his commissioners and would-be North Carolina constituents (if it’s true he longs to run for Senate next, in his home state) learned that this Emperor Has No Numbers.

To prove he still has power and can quantify something, he appears to have lined up the votes (but barely — and in conjunction with Democrats, not Republicans) to put a cap on how large a single cable-system operator can become.

The number in this case is 30%. As in, no cable operator shall be allowed to control more than 30% of all the subscribers to pay television services.

The curb, at this point, really applies only to Comcast, whose 26.1 million subscribers puts it at 27% of the total number of subscribers, by the FCC’s rules.

Remember, the FCC’s first attempt at installing a 30% cap was shot down by a federal court. That was six years ago, when satellite services were smaller and cable’s share of pay TV subscribership was bigger.

Now, DirecTV and EchoStar Communications’s Dish Network are the No. 2 and 3 operators of multichannel pay television services. Only Comcast is bigger.

But there is no cap being contemplated against satellite providers DirecTV or Dish, even though they operate nationally. Cable operators only operate in regional clusters.

Why cap cable?

The basic argument is that if a cable operator gets too big, programmers suffer. If you don’t get Comcast to pick you up, you can’t launch a national pay TV network, the argument goes.

But hold on a second or two. If you do get Comcast to pick you up, you still don’t get national distribution. You need your program to reach viewers in New York and Los Angeles, don’t you? You can’t do that if Time Warner Cable and Cablevision Systems don’t pick you up.

Jerry Jones and NFL Network are making it a political issue, trying to get state and national legislators to force carriage of its eight games on the “big cable companies.”

Legislators aren’t needed, though, for football fans to get the next big NFL Network game, in which the New England Patriots will presumably go for an undefeated season. They, as Mr. Jones points out, can go to DirecTV to get the game.

That’s the point. There is “no particular magic” about 30%, as one corporate antitrust lawyer put it this week. And in this case, there’s no particular meaning. No cable operator, not even Comcast, offers national coverage. If you want that, do what Major League Baseball did: Sign (or come close to signing) an exclusive deal with DirecTV and see if the cable companies come running for shelter.

With NFL Network, Comcast, Time Warner Cable and Cablevision aren’t seeking shelter from DirecTV (or Dish). They’ve been willing to let their competitors take this new national network on. They’ve taken their own approaches and have been willing to bear the brunt of the outcome.

If Kevin Martin doesn’t believe there’s adequate existing competition now, or adequate competition coming, he hasn’t been paying attention.

Just look at the stock market. Cable shares have taken a bath. In one day last week, Comcast shares dropped 12%, down to around $18. From $28, when the year started. This allegedly monopolistic company is finding itself repeatedly reducing its projections of how much cash it will generate from operations this year. Twice in the past six weeks, it has reduced its forecast, by 10% each time. And there are only four weeks left to go.

The culprit? Competition. As analyst Richard Greenfield of Pali Research put it, “The cable industry is no longer a group of regional monopolies. Cable is fighting an all-out war on multiple fronts” against satellite providers and telephone companies.

Programmers with a strong product will get national carriage, with cap or without. The NFL itself is proof of that, using DirecTV very successfully to extend audiences for virtually all local football telecasts. And that exclusive deal, “NFL Sunday Ticket,” is born from a clear competitive drive to differentiate its product, nationwide.

Kevin: Cable has its hands full. You’re just piling on.

But that is not surprising in the least.