Strong competition from direct-broadcast satellite and terrestrial competitors means the ban is no longer needed that prevents exclusive agreements between programming networks and cable operators that have invested in those channels, according to a Federal Communications Commission filing Monday by the National Cable & Telecommunications Association.
Due to the growth in penetration of the two big U.S. satellite-TV providers, DirecTV and EchoStar Communications' Dish Network, more than one in three video households (or about 28 million) now buy pay television services from vendors other than cable television providers, according to the NCTA filing.
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That means that if a channel were to refuse to deal with DBS companies, that programmer stands to lose 30% of its distribution revenue, the filing added.
Retention of the access ban serves to “distort marketplace competition,” according to the document.
But the NCTA's stance is at odds with arguments presented the same day by EchoStar. Cable consolidation has given Cox Communications, Time Warner Cable, Comcast and Cablevision Systems control of 56.75% of the cable market. Such “horizontal integration” heightens the ability of those companies to demonstrate anti-competitive behavior, EchoStar argues.
The program-exclusivity ban should be extended another five years, the DBS provider contended.
The ban is needed now more than ever because “cable providers have demonstrated they have the incentive, ability and audacity to use exclusive content rights to discriminate against other multichannel video providers,” the filing said.
The prospective end of the exclusivity ban threatens further growth in satellite, delivery of programming to rural independent cable operators and the promise of market entry by telephone companies, EchoStar asserts.
The “abuse” detailed later in the filing echoes EchoStar's complaint that it can't reach carriage terms for Philadelphia's Comcast SportsNet. Comcast has an exemption for the next five years that allows it to withhold the regional sports net from rivals. EchoStar said lack of access to this “must-have” network means its penetration is 40% lower in the Philadelphia market than the company expects it to be.
The filings are in response to a docket the FCC opened in late February, asking for comments on the ban, which currently is scheduled to expire Oct. 5 of this year. Congress created the ban under the 1992 Cable Television Consumer Protection and Competition Act, designed to protect growing competitors from getting locked out of the same popular programming available to cable systems.
The ban was reviewed in 2002 and extended for five more years. At the time of that review, satellite and other competitors had grown to serve one in four pay television households. However, cable still had a 78% penetration rate, so the ban was extended.
The NCTA notes that now that one in three pay television homes buy services from DBS and other competitive providers. Cable's share has shrunk, according to a 2005 FCC report, to 67% of video households.
There are still 57 national and 44 regional networks that are partially owned by cable operators. But the NCTA filing notes that only three of the top 15 satellite-delivered networks — TBS, TNT and Discovery Channel — are partially owned by cable companies. EchoStar counters that lack of access to just one “must-have” network can be crippling to a competitor.