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FCC Unlikely to YieldContract Control

Will the Federal Communications Commission give cable operators a little more breathing room on exclusive contracts for their co-owned channels? What about if the commission concludes that banning those contracts is no longer in the public interest or sustainable in a competitive marketplace? The best advice for both questions is to not hold one’s breath.

The FCC has teed up a vote on the periodic (in this case, every five years) review of the prohibition on exclusive contracts in its program access rules. According to a source familiar with the item, the review proposes two alternatives to continuing to regulate in the space, even with that conclusion.

The vote is scheduled for March 21, but FCC chairman Julius Genachowski has already circulated the item, which means it could be voted on before then.

Not surprising to anyone who has followed the FCC’s interest in access to regional sports networks, one option would be to scrap the exclusivity prohibition for everything but RSNs.

Actually, even if the prohibition on exclusive contracts was scrapped, terrestrially delivered RSNs would still likely have to be made available. In voting to close the terrestrial exemption from access rules, the FCC concluded that cable operators who do not share their owned terrestrially delivered regional sports networks with their competitors would be presumed to be violating FCC rules against unfair acts or practices—a separate portion of the rules that does not have a sunset provision.

The other option would essentially be a market-by-market waiver approach, where cable operators could seek to lift the prohibition by making a case for competition in individual markets. That is similar to the FCC’s approach to the ban on newspaper/ broadcast cross-ownership, where it allows for case-by-case consideration.

The source familiar with the pending FCC item added that cable operators who had met with commission staffers were not suggesting there was anything “nuclear” in it. That is likely because most of the access fights these days are over RSNs, which are not covered under the contract prohibition at issue

“The commission has to take some care to reconcile what it wants to continue to try to regulate with what was a clear intention of Congress to sunset exclusive program regulation,” says Dan Brenner, a partner at Hogan Lovells and former top attorney at the National Cable & Telecommunications Association.

Also at least teed up for comment in the item, according to another commission source, is how and whether program access rules in general should apply to volume discounts and price increases. Small cable ops have argued that their lack of size translates to diminished access because of their inability to get similar price breaks.

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