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McSlarrow's War

The cable industry goes into this week's convention in New Orleans facing continued regulatory threats. They may call that town the Big Easy, but for a cable industry that keeps being hammered by FCC Chairman Kevin Martin over its size and power, nothing has come without a struggle.

On the eve of that convention, National Cable & Telecommunications Association President Kyle McSlarrow talks with B&C's John Eggerton about the recent flood of lawsuits against the FCC and the cable industry's biggest growth opportunity—and it's not video, at least not in the traditional sense.

What are the biggest regulatory threats to the cable industry?

You don't have space enough. But I think the issue that looms largest is clearly net neutrality. Both because it is the type of issue that can morph into every facet of the provision of broadband service, and also because there is clearly interest [in the issue] on the Hill and at the FCC. The debate goes right to the core of what it means to invest and innovate and provide broadband service.

Without getting into the weeds of any particular operator or anybody else who manages their network, I will defend the right of any broadband provider to manage their network as they see fit when their focus is on ensuring that all of their customers have a superior customer experience.

How concerned are you about the FCC's inquiry into the packaging of cable channels by programmers to operators?

It is not clear to me what proposals specifically are out there. We have all seen [Chairman Martin's] public comments about using a pricing strategy to determine regulatory advantages or disadvantages. I just think that, across the board, it is a bad idea for the government to say that if certain programming costs a certain amount they will be treated one way, and another way below that amount. I don't believe there is a justification in a competitive market for discriminating in that way.

Where does the NCTA stand on retransmission-consent reform?

We believe that is a system that ought to be reformed. But since I obviously have members with many different perspectives on this, it is my job to try to fashion what a sensible solution might be. This is probably something that will have to come up and have to be addressed in the next Congress. The marketplace has evolved, but I'm not certain that the thinking about retransmission consent in 1992 reflects the marketplace we actually have in 2008.

But reform can be a double-edged sword, since some smaller operators say program untying could be part of the solution.

I think part of the confusion is that often people are mixing up wholesale unbundling with retail a la carte with retransmission consent. It is sort of a witch's brew of issues. NCTA has had a long-standing and merited position of not inviting the government in to regulate. What is different about retransmission consent is that this is an instance where it is not a completely free market. There are government rules that shape the contours of those negotiations.

How many lawsuits has the NCTA filed against FCC rules lately?

I've lost track, but I think it is eight or nine.

Why so many, or is that not a lot?

Oh, it's a lot. The people who have been here longer than I say that this is the most intense period for lawyers, not that they are complaining about the billing opportunities. I think it reflects the fact that we have had a highly regulatory agency make decisions that are either statutorily unsound or have huge implications for the Constitution.

You personally supported John McCain for the Republican nomination, even though he has been a cheerleader for a la carte. Why?

We've had a friendship for 15 years, and on most issues I am entirely in sync. And there are other issues like a la carte where we have to agree to disagree. I will point out that even in the case of a la carte, I think he has made clearer that while he would like to see the industry move toward that model, he is much more reluctant than maybe he was earlier to mandate it. To me, that is not an insignificant aspect of this issue.

Has he gotten more reluctant to hammer cable over rates?

Oh, no, I think he is perfectly happy to hammer us on rates. It seems to be a cottage industry.

Kevin Martin favors the telcos. True or false?

True. And it's not even a question of being pejorative about it. It's just a fact that given a fork in the road between supporting [or not supporting] policies that the Bells favor, most of the time, on most of the issues, he will support that agenda.

Speaking of telephone, given cable's quadruple play of bundled video, voice, data and now wireless, what do you see as the big growth area?

The broadband platform generally, and I include voice as part of that platform. Video is probably, relatively speaking, a low-margin product even though it is core to the business.

But I think the broadband platform probably offers the greatest opportunities for growth. And growth in broadband isn't just an operator issue. It is also ultimately a platform that I think will be an emerging growth area for programmers as well.

What would you consider regulatory successes of the past year?

We have had a lot of success in getting policymakers to realize how much investment is taking place in this industry and how short-sighted it would be to engage in a massive re-regulation of the industry. We have successfully argued that multicasting [government-required carriage of broadcasters' additional digital channels] is not just unconstitutional but self-defeating and unfair to other programmers who compete for carriage.

And when it comes to the DTV transition, the FCC—both in the dual-carriage order and public service messaging order—largely adopted the kinds of things we said we were prepared to do anyway. That was a clear victory.

But as I have discovered, issues never die. They just keep reappearing, so you just have to get ready for the next round.

So there is no silver stake that can be driven into its heart?

That's just the nature of the beast of regulation. People always come up with new and novel reasons why it should be reenergized.

For much more, check out the full interview

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