Verizon Appeals FCC’s Leased Access Rules

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Washington — Locking arms with the cable industry, Verizon Communications Inc. is going to court to challenge the rock-bottom rates that leased access programmers gained under Federal Communications Commission rules adopted last fall.

Verizon, a traditional telephone company that has signed up about 1 million customers to its FiOS video product, filed its case Tuesday in the U.S. Court of Appeals for the D.C. Circuit, the same venue chosen by the National Cable & Telecommunications Association for its appeal, court records show.

Nevertheless, the case will be heard by the U.S. Court of Appeals for the 6th Circuit in Cincinnati, where the United Church of Christ had filed its appeal. A lottery system is used to select the court when similar cases are filed in multiple courts.

A Verizon spokesman was not immediately available to discuss the substance of the appeal. The case filing system for the D.C. Circuit produced a docket number for Verizon’s appeal in addition to a reference to the Federal Register pages where the FCC’s leased access rules were printed on Feb. 28, 2008.

Federal law allows independent programmers to lease time on cable systems. Large capacity cable operators need to set aside 15% of their channels for such programmers. Last fall, the FCC said it slashed rates by 75% and imposed a 10-cent per month, per-subscriber ceiling nationally.

But NCTA, in asking the FCC to stay the rules pending appeal, submitted statements from Comcast and other cable operators claiming that the FCC’s rate formula would actually yield zero leased access revenue in many parts of the country. The new rates go into effect May 31, 2008 if not stayed beforehand.

Like Comcast Corp. and Time Warner, Verizon is a traditional cable operator covered by the leased access rate regime. AT&T, however, claims that its U-verse video service isn’t a cable service under federal law, meaning it’s exempt not just from leased access rules but also from host of other rules related to cable ownership, carriage of public access channels and local franchising requirements.

FCC chairman Kevin Martin, a Republican, pushed to reduce leased access rates, an effort endorsed by FCC Democrats Michael Copps and Jonathan Adelstein but not by FCC Republicans Deborah Taylor Tate and Robert McDowell.

In its stay request, NCTA argued that “by purposely encouraging a flood of new commercial leased access users, the new rules — and, in particular, the new rate formula — will irreparably harm both cable operators and cable program networks.”

Cable operators are allowed to fill unused leased access channels with their own programming choices.

NCTA asked the FCC to respond to the stay request by April 11. The FCC is unlikely to honor NCTA’s deadline because the agency announced on April 4 that it would accept oppositions to the stay through April 11.

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