FCC’s Program Access Options Draw No Support From Cable Rivals

Letting cable operators escape program access rules in markets where such a company can show competition from new multichannel video programming distributors, or applying the rules on a case-by-case basis, was opposed by USTelecom and some telcos and other MVPDs. “Approaches such as these ... raise several problematic issues, particularly for smaller, rural wireline video entrants whose ability to offer competitive video services is essential to increasing rural broadband deployment,” the association said (http://xrl.us/bncvoe). “Under the Commission’s proposed approaches, companies such as these would be placed on equal competitive footing with MVPDs such as Comcast and Cablevision, despite the vast differences in overall market share, number of subscribers and program purchasing power. Such an approach would inure solely to the benefit of major cable incumbents, and would allow for sunset of the rules in the very markets where wireline competition to cable is most needed."

Backers of ending the exclusivity ban pointed to increasing competition faced by cable operators. “The over 95 percent share of MVPD customers attributable to cable that concerned Congress in 1992 had dropped to less than 67 percent in 2006, and has further dropped to under 58 percent today,” the NCTA said. Program access law is in Section 628 of the 1992 Cable Act. Congress “expressly stated that the prohibition on exclusive contracts was to be of limited duration,” ending in 2002 unless the commission found it still was needed, the association said (http://xrl.us/bncvo9). “It is time for the Commission to fulfill the Court’s expectations and Congress’s intention by allowing the prohibition on exclusive contracts to sunset,” the NCTA said of a 2010 ruling by the U.S. Court of Appeals for the D.C. Circuit. “Vertical integration remains far below the levels that concerned Congress. And the companies that have made the marketplace vigorously competitive -- including DIRECTV, Dish Network, Verizon, and AT&T -- are robust national companies that now rank, respectively, as the second, third, seventh, and eighth largest MVPDs nationwide.”

Each of those companies want the exclusivity ban to remain. The commission “cannot” allow exclusive deals for certain markets or for programming not considered must-have, DirecTV said (http://xrl.us/bncvp4). “A market-by-market determination would be dysfunctional for a nationwide video service, such as the two satellite video providers. It is no solution at all to say that DIRECTV can offer its subscribers the USA Network in Washington, DC but not nearby Fairfax County, Virginia, when it offers and markets its programming packages on a nationwide basis.” For Dish Network, “the competitive landscape has not changed enough to justify the elimination of a rule that has allowed independent distributors to offer some of the most popular programming, thus giving consumers more choices in the pay-TV market,” that company said (http://xrl.us/bncvp6). “In fact, a greater number of top 20 cable networks (ranked by subscribership) are in cable hands now than they were in 2007."

Companies selling programming to MVPDs want program access rules ended. Discovery Communications (http://xrl.us/bncvrh) and Madison Square Garden Co. (http://xrl.us/bncvrm) don’t want the commission to review allegations of volume discounts or across-the-board cost hikes. The rulemaking notice asked about such an expansion of the rules. Commenters including the American Cable Association (http://xrl.us/bncvr8) and Mediacom (http://xrl.us/bncvsk) backed some expansion.

"Programmers Have No Incentive To Withhold Programming for Anticompetitive Purposes,” said the title of a section of Discovery’s comments. “Programmers that operate independently of their ‘affiliated’ cable operators have fiduciary and market incentives to maximize their own revenues. Even where there is true affiliation, a programmer could use exclusivity to benefit a distributor only if it could recoup the significant license fees and advertising revenues lost from forgoing distribution over competing platforms. This becomes more difficult -- and expensive -- as the number of subscribers to the competing distributor rises."

The move away from housing content and distribution under the same corporate roof is a reason why the exclusivity ban isn’t needed, said MSG, which was spun off Cablevision. Both those companies and Discovery face complaints about access to their programming or discriminating against independent channels, with an FCC judge to hear an indie’s program carriage case against Cablevision next year. (See report below.) “Neither MSG nor Cablevision has any equity stake in the other; and each company is answerable to its own stockholders,” MSG said. “MSG is nonetheless treated under the current framework as though its program licensing decisions are effectively dictated by the interests of Cablevision’s video distribution business.” Other spinoffs identified by MSG involved Time Warner Inc. and Time Warner Cable, AMC Networks and Cablevision, and Liberty Media and DirecTV.