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FCC Presumes Cable Faces Traditional Video Competition

FCC sources confirm the FCC has voted to presume cable operators face competition for traditional video in their local markets unless a franchise authority or other party can demonstrate otherwise, confirming a June 1 report in B&C/Multichannel News, though the expected dissents from one or more Democrats may be only partial.

The decision reduces paperwork for cable ops, but as a practical matter does not change the landscape dramatically since the FCC has granted virtually all such requests, thanks largely to the presence of DBS competition.

The vote count was 5-0 on reversing the presumption for smaller operators, but 3-2 on applying it to all operators, with Democrats Jessica Rosenworcel and Mignon Clyburn dissenting from applying it more broadly.

The vote was to reverse the existing rebuttable presumption that cable operators are not subject to effective competition, and comes after the FCC had granted all such petitions in whole or in part over the past couple of years.

The presumption dates from the 1992 Cable Act, which dates from a time when cable ops had a 95% MVPD market share, which is now a tad over 50%, something the National Cable & Telecommunications Association pointed out in pushing for the change.

In a statement, FCC Chairman Tom Wheeler explained his reasoning for backing the change.

"For the last several years, we have been able to watch real world examples of what happens when cable rate regulation is removed.  In the thousands of cable systems subject to Effective Competition, we have a sizable cohort of real life examples, not hypotheses. Significantly, our most recent report on cable industry prices concludes that the average rate for basic service is lower in communities with a finding of Effective Competition than in those without such a finding.  This is not surprising since competitive choice is the most efficient market regulator," he said.

"Similarly, there has been no evidence in this proceeding to suggest that our previous findings of Effective Competition in thousands of communities led to any changes in the tier placement of local broadcast stations." That is something that clearly concerned broadcasters opposing the change.

"This is our presumption: competition results in lower prices for consumers. However, any local franchising authority is free to come to the FCC and rebut this new presumption for its service area, and, where successful, regulate basic tier cable rates.  In addition, nothing in this Order affects other franchising authority responsibilities including the collection of franchise fees, provisions relating to PEG channels and I-Nets, and the creation and enforcement of customer service standards."

The FCC was under a congressional deadline of June 2 to come up with an order streamlining the effective competition process for smaller cable operators, particularly rural, but decided to reverse the presumption for all operators.

Of course it is not as though Democrats elsewhere weren't also split over the plan.

Broadcasters have been pushing back hard, but so have a number of high-profile Democratic senators and public interest groups, as well as the local franchising authorities that will lose rate regulation authority.

The National Association of Broadcasters, which fought the change, was not pleased.

"The FCC decision clearly contradicts language expressly written into statute by Congress just six months ago in the satellite TV bill," NAB said in a statement. "Moreover, it’s disappointing and surprising that as cable customer satisfaction ratings plunge to a record low, the FCC believes it is wise to gut the one protection that allows local municipalities a chance to protect consumers from abusive treatment and consistently skyrocketing rates."

"NAB salutes the 16 U.S. Senators, ranking House Commerce Committee member Pallone, and more than a dozen public interest groups, who fought to protect consumers against monopoly cable rates."

The National Cable & Telecommunications Association, which backed the change, responded.

"Consumers today enjoy the benefits of a rapidly evolving and increasingly competitive video marketplace that is offering a huge array of choices from cable, satellite, telco and Internet video providers," NCTA said in a statement. "The growth in competition over the past two decades provides clear evidence that the effective competition threshold established by Congress has been met and surpassed in every DMA across the country.  The very nature of the effective competition test reflects Congress’s preference that competition, not regulation, is the best way to promote innovation and consumer choice."

"We would welcome the FCC taking common-sense action to adopt a needed update of its procedures and rejecting the self-interested fear-mongering of broadcasters whose sky-is-falling rhetoric is belied by both actual facts and the Commission’s own experience."

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.