WASHINGTON -Interactive television, now under a heavy regulatory microscope at the Federal Communications Commission, has yet again exposed the reality that cable operators and programmers aren't shy about airing their differences in public.
The FCC is exploring whether cable operators-on the theory that they will someday possess a death grip on the ITV industry-should be barred from signing exclusive deals with affiliated ITV providers, and perhaps with any ITV provider.
In comments filed last week, the National Cable Television Association and Comcast Corp. told the FCC that ITV was too new and too untested for the agency to even consider regulating business arrangements. They also argued that the FCC had no jurisdiction to regulate cable provision of ITV services.
In atypically strong terms, the NCTA called the FCC's examination of ITV "misguided" and "pointless," adding that the FCC's decision to ask "whether and how it should regulate this embryonic and hypothetically defined service" was unprecedented. The NCTA said the vast majority of cable's 68 million subscribers have no access to ITV products.
"Here, there is not even an identifiable market, let alone an identifiable market failure," the NCTA said, adding that government regulation of ITV could infringe on the First Amendment rights of cable operators.
The NCTA also said the "threat of regulation can only serve to exacerbate" the Wall Street "meltdown" that has decimated Internet stocks and companies developingy ITV products.
Taking the opposite approach was Viacom Inc., the cable programming and broadcast-station giant.
In joint comments filed with The Walt Disney Co., Viacom warned the FCC that if it failed to intervene now, cable operators would use their digital set-tops to discriminate against competing electronic program guides, degrade the service of competing ITV providers and charge "discriminatory tolls" for consumer access.
"There is no sound basis for believing that vertically integrated broadband distribution providers with market power will voluntarily refrain from discriminatory practices and skewing consumer choice," the Disney-led group said.
Viacom's call for FCC intervention came the same week the company continued its campaign to escape agency rules that cap its TV station ownership at 35 percent of TV households. Now at 41 percent, Viacom has until May 4 to comply with the 35 percent cap.
Last week, the company asked a federal court here to enjoin the FCC from enforcing the 35 percent cap while litigation was pending.
Although Viacom wants the FCC to enforce nondiscrimination mandates on cable operators in the ITV arena, the company has taken the opposite position with respect to the exclusive sale of programming networks to cable operators.
Under FCC program-access rules, cable companies that own networks are required to sell satellite-delivered programming to direct-broadcast satellite carriers. DBS carriers want the rules extended to companies like Viacom and NBC, which own cable networks but not cable systems. But Viacom has fought extension, claiming its ability to sell new cable networks to cable operators on an exclusive basis is critical to establishing new networks in the marketplace.
ITV is a service that combines traditional television programming with Internet functionality, allowing viewers to make purchases, call up additional data and graphics, or ship electronic-mail messages. Some analysts predict ITV could be a $25 billion to $40 billion industry within five years.
The FCC's inquiry-at this point a fact-finding mission that might later develop into a formal rulemaking-developed from the FCC's and the Federal Trade Commission's review of the merger between America Online Inc. and Time Warner Inc.
At Disney's urging, the FTC refused to approve the AOL-Time Warner deal unless the companies agreed not to use their cable systems to interfere with ITV triggers sent by Internet-service providers that had carriage deals with the new company. The FTC's order, however, expires in five years.
In the wake of the FTC's order, the FCC issued a notice of inquiry that asked whether cable operators not covered by the FTC's consent decree should be barred from discriminating against unaffiliated ITV providers.
Without mentioning the FTC conditions, AOL Time Warner Inc. echoed NCTA's position that the ITV market was awash in question marks regarding who will be the providers, what will be the services and what will whet consumer appetites.
Fears that cable operators will use set-top boxes to discriminate were baseless, AOL Time Warner added, because the FCC already has rules meant to ensure consumers can obtain set-tops from sources unaffiliated with their cable operator.
"Unaffiliated ITV providers thus are free to develop and market their own ITV-capable STBs, thereby bypassing the cable operator's own STB," AOL Time Warner said.
In separate comments, the National Association of Broadcasters endorsed nondiscrimination rules, claiming that the ITV market was developing rapidly and rules were needed today to prevent more intrusive regulation at a later point.
"Given the expected rapid development of ITV service, the question for the [FCC] is not whether, but when, it will be compelled to address, in the ITV context, competitive issues arising from cable's gatekeeper role," the NAB said.
The NAB's position was embraced by Gemstar-TV Guide International Inc., which told the FCC that although it had ITV access to consumers without reliance upon cable, the company was concerned that cable operators could strip ITV triggers embedded in broadcast video streams.
The National Football League, echoing the NCTA's stance, said in a filing released by the FCC last Thursday, "because the ITV market is, at most, nascent, it would be premature for the [FCC] to determine that the best way to foster its growth is through regulation."
The NFL also warned the FCC that if the agency adopted nondiscrimination rules applying to cable MSOs and their ITV providers, the agency should not interfere with the football league's ability to sign exclusive ITV deals designed to protect the NFL's copyrights, trademarks, team brands and logos.
"In the world of ITV, we anticipate that we would continue to use contracts to protect and exploit our intellectual property rights to promote the development of program-related ITV services," the NFL said in its seven-page filing.
The NFL's position put the league at odds with Viacom, owner of the CBS broadcast network, which has the rights to air NFL games.
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