 | |
| |
TechnologyDaily Mobile
Cable's Split With Kevin Martin
by David Hatch
For cable television operators, the surprise plan by FCC Chairman Kevin Martin to re-regulate the industry after Congress deregulated it more than a decade ago was the final straw. In a sign that cable's relations with Martin had reached a new low, chief lobbyist Kyle McSlarrow excoriated the chairman this month during a lengthy critique that amounted to the regulatory equivalent of a messy divorce.
"My judgment is that the FCC is broken," McSlarrow, president and CEO of the National Cable and Telecommunications Association, asserted during a conference call with reporters. "We're not going to fundamentally wreck a business model and hurt our customers in order to appease one chairman of the FCC."
The icy relations stretch back to 2005 when Martin, newly installed as chairman, began urging cable systems to adopt per-channel pricing, known as a la carte. Operators have resisted ever since, arguing that consumers would pay more per channel and warning that struggling programmers that survive by being packaged with popular ones would falter.
Martin's response, cable officials say, has been to punish them with regulatory initiatives, including relaxed franchise obligations for competitors, new specifications for set-top boxes, a ban on proprietary contracts with apartments and condominiums, and proposals for additional broadcast carriage mandates. Martin repeatedly has denied he is seeking retaliation.
"He's been very clear that his primary agenda is the imposition of a la carte on the industry," McSlarrow insisted, adding that Martin acknowledges such rules cannot be imposed directly. "There's no question in my mind that the array of items that have been either brought before the commission or have been proposed are designed to pressure the entire industry," McSlarrow said.
The A La Carte Assault
In the latest flap, Martin concluded that the cable industry has achieved market dominance because more than 70 percent of U.S. homes subscribe to the service, a threshold that allows regulators to impose additional rules. The finding is outlined in the FCC's new annual report on video competition, to be considered at the agency's Tuesday public meeting.
The chairman is using the assessment to justify fresh regulations on cable, including proposals to reduce rates that systems charge independent programmers that purchase capacity on leased access channels and to tighten program-access rules that ban exclusive content arrangements. The meeting is scheduled to include a vote on an item addressing those matters.
Martin, meanwhile, is circulating a plan to reinstate the cable cap, which prohibits systems from commanding more than 30 percent of the multi-channel video marketplace. In 2001, a federal appeals court remanded the limit to the FCC, saying further supportive evidence was needed.
There also is speculation that Martin will seek to require "wholesale a la carte," which would bar programmers from making channels available to operators on a packaged basis. The restriction would eliminate a key excuse that cable systems cite for not offering per-channel options to consumers.
During a Nov. 13 conference call with reporters, Martin denied any ulterior motives. "I haven't proposed anything for the commission to do on a la carte," he said, noting that he continues to encourage "voluntary" adoption of the model.
"Cable rates are up over 100 percent over the last 10 years, and [subscribers are] increasingly paying for channels that they're not watching," Martin said in defense of his regulatory efforts. He added that some surveys indicate cable viewers watch only 15 of the 100 channels they pay for. "I think that they deserve to have more choice."
The Data Debate
Martin emphasized that the statistics highlighting the cable industry's dominance did not originate with the commission, implying that the data was not influenced by the agency. "It was based on one of the outside resources and data services that the commission relies upon," he explained. But that source was Warren Communications, a newsletter publisher, which subsequently distanced itself from the information, saying that the data isn't "well-suited" for policymaking.
The admission already has cost Martin the vote of FCC member Robert McDowell, who said during a Nov. 19 speech that he does not want the cable industry re-regulated. "This is a radical departure for the commission -- a departure being made without sufficient chance for public comment," he said. Deborah Taylor Tate, the third Republican on the five-member panel, shares McDowell's concerns about the data's accuracy.
Upping the ante, 23 Republicans on the House Energy and Commerce Committee have urged the agency not to impose new rules on cable. "Such actions are unsupported by the record of significant competition in the video-programming marketplace, and would be harmful to innovation and consumers," they wrote in a Nov. 20 letter to the commission.
Jesse Jackson, president of the Rainbow PUSH Coalition, warned in a statement that a la carte would "raise prices for consumers and hurt most programmers." The Faith and Family Broadcasting Coalition, which represents religious broadcasters worried about losing viewers under per-channel pricing, raised similar concerns.
Other watchdogs and religious groups, however, applauded Martin's finding. They alleged that cable operators routinely underreport their subscriber levels, which they said explains the lower figures compiled by some analysts.
"The commission has explicitly relied upon Warren Communications News data in past reports. Any argument that use of this data constitutes an arbitrary change in methodology is factually incorrect," the Media Access Project, a public-interest law firm, said in a Nov. 16 letter to McDowell and Tate.
Reality Check In The TV Market
Cable officials are quick to highlight the competition they face from nationwide video services being deployed by nascent players, such as AT&T and Verizon Communications, and direct-broadcast companies that have morphed into major competitors. The so-called 70/70 rule stems from the 1984 Cable Act, which industry officials consider outdated because it predates the Internet and was adopted when satellite television was in its infancy.
"If you just look over the last year, the cable industry has lost a little under 200,000 basic subscribers," McSlarrow said, noting that DirecTV and EchoStar -- the second- and third-largest multi-channel video providers -- gained 1.8 million customers during that timeframe.
By contrast, 20 years ago cable controlled virtually the entire multi-channel video universe, he said. "This kind of intense competition ought to be the cause for celebration, not an excuse for more regulation, and it's an opportunity for some humility from regulators," McSlarrow added.
The NCTA president also took aim at Martin for announcing the agency's findings about cable through leaks to national news outlets rather than by circulating tentative rules among colleagues. And he slammed the FCC for: 1) not initially disclosing the data used to justify the change; 2) ignoring its 2006 conclusion that cable had only reached 56 percent market penetration; and 3) failing to explain how cable could have grown so dramatically during such a short period.
NEW FEATURE
-Advertisement-
-Advertisement-
-Advertisement-
