The Federal Communications Commission last Tuesday opened a long-awaited rulemaking on whether cable operators must continue to sell many of their video-programming services to satellite and phone-company rivals.
Key features of the federal program-access rules are scheduled to expire on Oct. 5, 2007, if not extended in the coming months. The rules were lengthened for five years in a June 2002 ruling narrowly supported by FCC chairman Kevin Martin, then a regular FCC member. In recent weeks, Martin has indicated support for a second extension.
Enforcing a 1992 federal law, the FCC has required cable companies to sell satellite-delivered programming in which they have an ownership interest to competing multichannel-video programming distributors (MVPDs). Thus, Time Warner has been forced to sell CNN and HBO to such competitors as DirecTV, EchoStar’s Dish Network and Verizon Communications’ FiOS TV service.
According to the FCC’s most recent cable-competition report, 57 national and 44 regional cable networks are both satellite-delivered and affiliated with at least one cable operator.
Congress created the rules in order to promote pay TV competition at a time when cable had 95% market share. The fruits of that effort began to emerge a few years later with the introduction of direct-to-home satellite TV, an industry led today by DirecTV and EchoStar Communications with about 28 million subscribers combined.
Five years ago, the National Cable & Telecommunications Association called on the FCC to eliminate the exclusivity ban and allow cable operators to decide on their own how to distribute their programming services.
“We continue to believe that the ban is no longer necessary in today’s competitive video marketplace. The FCC has already concluded that video competition is providing consumers with increased choice, more programming and better services than ever before, which is evidence that the exclusivity ban has outlived its usefulness,” said NCTA vice president of communications Brian Dietz.
The FCC didn’t suggest a specific length of time for a rule extension. But it did seek comment on whether the rules “if retained, should be automatically abolished depending on the triggering of a specific event or events” in the market.
“It’s possible the [FCC] is considering eliminating the program-sharing requirement if cable’s nationwide market share were to fall below a certain level,” said Paul Gallant, a former FCC official and now a media analyst with Stanford Washington Research Group.
In recent years, EchoStar has pressed both Congress and the FCC to extend the rules to cover cable-affiliated programming networks that are delivered terrestrially to MVPDs. In its proposed rulemaking, the FCC did not directly mention plans to close the so-called terrestrial loophole. On prior occasions, the FCC said it lacked the authority to broaden the rules.
Nevertheless, the FCC has used its authority to approve media mergers to broaden the scope of reach of the program access laws further than the original intent of Congress.
Last July — in approving the sale of Adelphia Communications Corp. — the FCC said that, for the next six years, Comcast and Time Warner could not withhold regional sports networks, whether satellite- or terrestrially delivered, from their pay-TV rivals. Comcast SportsNet Philadelphia received an exemption with regard to distributors not under contract.
In December 2003, News Corp., which didn’t own cable systems, agreed to comply with the program access rules in order to win FCC approval of its controlling investment in DirecTV. News Corp.’s commitment extended to its satellite-delivered networks while the FCC’s rules as applied to cable operators remained in effect.