Sununu Targets Martin

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Washington—Sen. John Sununu (R-N.H.) last Tuesday questioned some policy calls of Federal Communications Commission chairman Kevin Martin at a Senate Commerce Committee hearing on whether Martin should receive another five years at the agency.

Sununu, a brash and vocal advocate of communications deregulation, indicated that Martin had been too willing to insert the FCC into places that should be left to the market.

“Without a doubt, [Martin] has pursued policies to restrict marketing of Internet services,” Sununu said. “He’s pushed to establish must-carry regulations for multicasting. He’s advocated price controls on cable television.”

JOINED IN ’01

In 2001, Martin was appointed to the FCC by President Bush. Bush elevated Martin to chairman in March 2005 after then-chairman Michael Powell resigned. Martin’s term expired in June but he can remain at the agency until Congress adjourns late next year.

In some key areas, Martin has moved in opposite directions, deregulating digital-subscriber-line service in August 2005. But a few months ago, an FCC majority that included Martin agreed to impose universal-service-fund taxes on cable’s voice-over-Internet-protocol service — an example of new technology subsidizing the old.

On the matter of multicast must-carry — which would force cable operators to carry perhaps six programming service per digital-TV station —Martin said he had no “current intention” of reviving the issue because there wasn’t an FCC majority in support. For years, Martin has advocated government-mandated multicast must-carry and urged cable to sell channels a la carte.

In some apparently new comments on cable’s market structure, Martin told Wall Street analysts last Thursday that cable’s expanded-basic tier is a “tying” arrangement because consumers can’t buy channels individually and are denied refunds for channels they either block or refuse to watch.

Martin — who spoke on a conference call co-hosted by Aryeh B. Bourkoff, cable, satellite and entertainment analyst at UBS Investment Research —said cable’s most popular programming tier is not an example of bundling in an economic sense because none of the channels is available for sale outside of the tier.

Instead, he added, expanded basic is an example of commercial tying.

“Tying is taking things that are sold separately and stopping selling them separately and only selling them together in a bundle,” Martin said. “Tying is what’s occurring in the cable industry, and that’s different from just bundling.”

Martin didn’t say whether expanded basic was an illegal tying under anti-trust law.

He argued that when cable operators add channels to expanded basic and raise prices, many consumers end up paying more to receive channels they don’t want to watch.

“Cable prices for the expanded-basic tier are up almost 100% — it’s about 90% — since the 1996 [Telecommunications] Act was passed,” Martin said. “If [subscribers] don’t want to have X channel — MTV —come into their home and have to have it blocked, why should they have to continue to pay the 50 cents per month ... for a channel they’ve asked to be removed?”

To the extent that he broke new ground at his Senate hearing, Martin made a vague reference to FCC movement on the issue of network neutrality, which involves policies that would restrict broadband-access providers from demanding payment from unaffiliated content providers. FCC staff, he said, was preparing a document designed to solicit public comment on ways of monitoring the conduct of broadband-access providers outside the context of formal complaints. Martin’s staff declined to offer further details.

OWNERSHIP QUERIES

Martin repeated that he had doubts, which he didn’t identify, about the FCC’s relaxation of broadcast-ownership rules in June 2003. Sen. Byron Dorgan (D-N.D.), a strong critic of the rules, then asked Martin why he voted to allow one company in the country’s largest local markets to own three TV stations, eight radio stations, the cable company and the dominant newspaper.

“I did because I thought that was what the record indicated in certain of the largest markets,” said Martin, who has the FCC poised to make another run at easing the rules. In June 2004, a federal court substantially blocked the FCC’s rules from taking effect.

Martin also claimed that the FCC had the power today to use the $6.5 billion USF to subsidize rural broadband-infrastructure programs. But he said the expense of it would make expansion of the program impractical.

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