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Waiting For Martin’s Next (Big) Steps

In December, a politically divided Federal Communications Commission adopted rules that give franchising authorities 90 days to act on cable entry petitions filed by phone companies and others with pre-existing access to rights of way.

But pressuring local governments to act swiftly on the cable franchise applications of companies like AT&T and Verizon Communications could be just a baby step in FCC chairman Kevin Martin’s ongoing march to overhaul cable competition policy.

The biggest step would be a ruling by the Martin-led commission that AT&T’s Internet Protocol-TV offering is an interstate service. That would have the effect of sweeping aside any actions taken by the 50 states — including the ones that have gone to statewide franchising to appease the deployment schedules of AT&T and Verizon.

Another big step: the FCC could declare that IPTV is an information service, just like digital subscriber line, cable-modem service and dial-up Internet access. That would be a gamechanger because, as a rule, the FCC doesn’t regulate information service providers. Nor do the states.

If either step were to be taken, the FCC would effectively be saying that IPTV isn’t a cable service within the meaning of federal law. If IPTV isn’t a cable service, then none of the key cable provisions found in Title VI of the Communications Act would apply, including franchising requirements; franchise fee obligations; mandatory carriage of local TV stations; program access rules; public access and leased access channel set-asides; and local approval of IPTV system sales. In short, regulatory nirvana for IPTV providers.

AT&T (when it was SBC Inc.) mentioned in FCC filings just three cable rules it thought would apply to IPTV: closed captioning mandates, retransmission consent from TV stations and equal employment opportunity standards. As to buildout requirements, level playing field laws and the like, AT&T’s view was this: Forget about it.

After almost two years in office, Martin has said very little on this subject. Last month, he indicated in a talk at a legal education forum that any action would await judicial review of the FCC’s November 2004 order that held Vonage’s voice-over-Internet Protocol service was interstate in nature and not subject to various state codes.

“There is still a question about whether IP video should be treated as a traditional cable service subject to local franchising authority or whether it’s not a service subject to Title VI in the same way that voice-over-IP isn’t traditional telecommunications subject to all of the [common carrier] regulations,” Martin said.

The U.S. Court of Appeals for the 8th Circuit is expected to hand down a ruling in the Vonage case any day.

Of course, that’s after it’s been under review for more than a year, an unusually long time even for the notoriously deliberate federal bench.

“I think that the decision [that] will come out of that [Vonage] case will be critical in trying to craft whether or not the commission’s authority to deal with all these IP services will continue to be affirmed,” Martin explained.

In any IPTV ruling, the FCC would likely need to define IPTV so that cable incumbents would know just how much IP-formatted traffic there needs to be in a network for it to be able to have regulatory parity with AT&T and its U-Verse service. Also hazy at this point is whether IPTV providers would, like cable companies, be eligible for compulsory copyright licensing, which creates legal rights to carry local TV stations without fueling copyright disputes with Hollywood studios and sports leagues.

Like the 90-day shot clock just created by the FCC, regulatory exemptions for IPTV service will spawn law suits, meaning the courts get to decide whether the Martin FCC has pushed the law beyond reason.