Target: Program Access

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Cable operators didn't wait long before trying to leverage a federal appeals court's decision in Comcast vs. FCC smacking down the 30% cap on national pay TV subscribership.

In a filing with that same court only four business days after the decision came down, attorneys for Cablevision Systems and Comcast argued the decision bolstered their case against the Federal Communications Commission's continued renewal of a ban on exclusive programming contracts, most recently tacking on another five years in 2007.

The U.S. Court of Appeals for the D.C. Circuit is scheduled to hear oral arguments Sept. 22 on the challenge of the 2007 order by Cablevision (joined by Comcast).

In a letter to the D.C. Circuit, Cablevision and Comcast pointed out that in its decision to overturn rules limiting U.S. pay TV providers to serving no more than 30% of all subscribers nationwide, the court concluded “[c]able operators … no longer have the bottleneck power over programming that concerned the Congress in 1992.”

“As the D.C. Circuit Court's decision on the 30% subscriber cap reinforced, the marketplace we operate in today is vastly different than it was decades ago,” Cablevision said in an e-mail statement explaining the filing. “We believe that the same consideration applies to the program-access rules.

“Those rules were intended to last only until competition took hold, which it has with three to five video competitors in many markets. A company operating in such a competitive market should be free to make investments in innovative new offerings and use those new offerings to provide better products for consumers and differentiate themselves from competitors.”

The FCC has continued to renew the ban which, like the 30% subscriber cap, was part of the 1992 Cable Act. The ban had a 10-year sunset unless the FCC found it still to be necessary. The agency has kept it in place, arguing that it continued to be necessary to require cable operator-owned networks to be made available to satellite operators under similar terms and conditions.

In the Comcast case, the D.C. Circuit concluded satellite-TV is now a competitor to be reckoned with, and that the FCC was arbitrary and capricious in not explaining why it did not consider it as such.

“Widespread withholding [or programming] is now implausible,” Cablevision and Comcast told the court in briefs. “[T]here are proportionally fewer services to withhold. The limited withholding that may still occur will not threaten competition: most vertically integrated services have closely similar substitutes, and, when competitive MVPDs have sunk massive investments, withholding can no longer cause market exit.”

The National Cable & Telecommunications Association, in a filing on video competition back in May, called program-access rules, and several other cable related regulations, “relics of a bygone era.”

A wealth of competition has spurred cable to provide more and better services, the NCTA said, suggesting that Congress's intent had been “unquestionably achieved” thanks to the “inevitable” growth of video competition, including from the Web as well as satellite.

The NCTA noted that satellite TV had grown from essentially no presence in 1992 to 29.2% of the market in 2006.

Citing Time Warner Inc.'s spinoff of its Time Warner Cable unit earlier this year, NCTA said that, adjusted for that divestiture, the 14.9% of cable networks owned at least in part by cable operators falls to 9.6%. NCTA said no cable operator owns more than one of the top 25 networks.

“In these circumstances, any lingering concern that cable operators might thwart competition in the video marketplace by favoring an affiliated program network or by withholding a vertically-integrated network from a competitor should have disappeared,” the trade group said.

Cable operators received some support from an unusual place last week: the former Media Bureau chief to FCC chairman Kevin Martin, who voted to extend the program-access rules in 2007.

Donna Coleman Gregg, in a piece for think tank The Free State Foundation, wrote: “Based on current conditions in the cable-television industry and the broader video programming-distribution marketplace, it appears that Congress's objectives largely have been achieved. The past two decades of sustained subscriber growth and the expanding amount and diversity of programming and other services now available to cable subscribers certainly indicate that the once-maligned cable industry has served consumers well.”

PROGRAM ACCESS: A Timeline

1990:

In a report to Congress, the FCC concludes that direct-broadcast satellite could emerge as a competitor if it could “obtain reasonable access to programming” owned by the cable operators.

1992:

Congress passes the Cable Act, prohibiting “exclusive contracts between a cable operator and a [satellite-delivered] cable-owned programming network.” The provision sunsets in 10 years, unless the FCC determines it is still necessary to “preserve and protect competition and [programming] diversity.”

1996:

U.S Court of Appeals for D.C. Circuit rejects Time Warner Cable's First Amendment challenge to program-access rules.

2002:

FCC extends the access provisions for another five years, saying cable operators “still had the incentive to withhold programming” and that five years was the minimum time in which the competition “envisioned by Congress” could develop.

2007:

FCC initiates a rulemaking on whether or not to extend the prohibition for some additional period, concluding it should be extended for another five years, with a further review in the last year of that span. The FCC decided that “cable operators continued to control a sizable share of national programming networks.”

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