NEW ORLEANS -- Without specifically confirming expected merger of FCC Mass Media and portion of International bureaus into Cable Services Bureau, Mass Media Bureau Chief Roy Stewart said he planned to remain in merged bureau and denied that merger was antibroadcast move. At NAB Radio Show here Thurs., he would say only that he had read in the press about restructuring (CD Aug 29 p1), but said it should be seen as further effort to convince broadcasters to accept fact of convergence of media.
Notable CROSS rulings
U.S. Appeals Court, D.C., may be more inclined to overturn FCC’s media ownership rules than to affirm them, ex-FCC Gen. Counsel Christopher Wright said Wed. in investor’s conference call sponsored by Legg Mason. Court will hear 2 challenges to media rules in oral argument Fri. One by Fox, NBC and Viacom challenges 35% broadcast-cable national ownership cap. Other, brought by AOL Time Warner, challenges local broadcast-cable cross-ownership rules. Wright, who isn’t involved in cases, said if court were to affirm FCC rules it probably would be on procedural grounds. He advised observers to notice whether judges were interested in whether FCC case was “reviewable.” If it’s determined that FCC didn’t examine rules in detail, only enough to decide not to open them for review, there’s “presumption” that such action can’t be reviewed by court, Wright said. That would work in favor of Commission, he said, and court probably would decide it should wait for FCC to formally undertake review. However, he noted, this is court that overturned FCC’s cable rules, so if it considers substance of issue it might be likely to overturn media ownership rules. He said it also would be interesting to see how judges looked at significance of Congress’s role in setting ownership numbers. Regardless of outcome, FCC probably will revise rules on its own in congressionally mandated upcoming biennial review, said Legg Mason analyst Blair Levin, ex-FCC chief of staff. Levin said ownership probably was most important of 4 FCC cases slated for oral argument this fall because it could have such profound effect on economics of industry. Others are: (1) Sept. 25 hearing by 4th U.S. Appeals Court, Richmond, Va., of challenge by DBS providers to FCC’s implementation of must-carry provisions of Satellite Home Viewer Improvement Act. (2) Oct. 2 hearing by U.S. Supreme Court of challenge by cable industry to ruling by 11th U.S. Appeals Court, Atlanta, that could cause increase in rates they pay for pole attachments. Levin and Wright said that case could have implications for debate over broadband open access. Issue arose after lower court said public utility companies didn’t have to limit their pole attachment rates to regulated levels if cable companies were using attached lines to offer high-speed access. (3) Oct. 10 Supreme Court hearing on challenges to decision by 8th U.S. Appeals Court, St. Louis, on FCC’s TELRIC (Total Element Long Run Incremental Cost) pricing regime for unbundled network elements (UNEs). Case could have significant effect on debate over competitive access to UNE combination called enhanced extended links, Levin said.
Media watchdogs say they're closely monitoring negotiations between Viacom’s UPN and advertisers for signs that product placements will become rampant in cable network’s fall shows. With increasingly bleak economy and tough ad environment for TV concerns, watchdogs expressed reservations about $30 million deal between UPN and advertisers represented by Omnicom Group, including Cingular Wireless, Gillette, McDonald’s, State Farm Insurance and others. Deal already is done, UPN official said, but details of “value-added” elements still were being worked out. Still on table are product placements in shows themselves, logo “bugs” in corner of TV screen and other corporate sponsorship ideas. “If commercial speech overwhelms artistic expression, that’s a source of concern,” critical observer said.
FCC is expected at Sept. 13 agenda meeting to consider streamlining accounting rules for Bell companies and other large ILECs as part of biennial review process. Bells expect Commission to cut back on number of accounts they have to keep but it wasn’t clear whether agency would go further and streamline related accounting rules, such as affiliate transaction reporting. FCC last Oct. proposed cutting number of regulatory accounts Bells had to keep and called for comments on what additional steps should be taken to ease reporting requirements. Bells support such actions, saying it’s costly and time consuming to submit accounting reports based on several hundred categories of operation, some of them not pertinent to way they run their businesses. They say FCC rules require them to keep track of financial data differently from what they do for business purposes and, as result, they keep separate regulatory and business books. Bells chafe under Commission’s practice of making much of that financial data public. They have asked agency to cut back number of accounts to level reported by smaller ILECs, saying fewer accounts would at least reduce expense of keeping those separate books. They have urged FCC not to add new accounts as agency indicated it might do. Also important to Bells is whether FCC will go further and cut back on related rules such as those governing affiliate transactions -- transfer of services and goods from affiliates such as payroll, Yellow Pages or wireless units to parent Bell companies. Rules stem from concern about Bell companies’ subsidizing their unregulated affiliates, particularly when Bells had guaranteed rate-of-return. BellSouth official said rules were outdated and forced Bells to operate their companies in inefficient manner to avoid triggering expensive tests required by affiliate transaction rules. Bells have to run tests to compare cost they book for such services with “estimated fair market value.” BellSouth official said requirement “drives bizarre behavior such as not doing things because it would be too expensive to run a test.” Risk of cross- subsidization has lessened under price cap regime, official noted. Bells would prefer to see end to requirement that they track those transactions but at very least they would like rules changed so they wouldn’t have to conduct costly test for every transaction, official said. FCC took steps toward easing affiliate transaction rules in earlier order but BellSouth and others said that action didn’t go very far in practice.
U.S. Appeals Court, D.C., denied Global Crossing’s petition for review of FCC order requiring it to compensate Verizon for payphone calls that were routed over Global Crossing’s long distance network. In opinion issued Tues., court said FCC’s decision was “consistent with the statutory scheme and neither arbitrary nor capricious.” Global Crossing had disputed Verizon’s statement that it had met Telecom Act-mandated conditions for receiving compensation, particularly requirement that it discontinue payphone subsidies in return for getting payment directly from long distance companies. Global Crossing sought more proof that Verizon had ended subsidies but FCC ruled that Verizon had to certify only that it had done so, not prove it. FCC said if Global Crossing believed subsidies still existed it could file complaint. Global Crossing appealed, saying Commission decision violated Telecom Act and wasn’t “reasoned decision- making.” However, court said FCC’s process was “reasonably calculated to accomplish the congressional purpose.” Opinion written by Judge Merrick Garland said FCC didn’t rely solely on certification but also made ILECs liable for penalties, including fines, if they certified falsely. In addition, long distance companies were able to file complaints to recover damages, court said. “Certification is merely the initial step in the Commission’s enforcement scheme,” said 3-judge panel that also included Judges David Tatel and David Sentelle.
NOAA decision to suspend proposal to levy up-front $120,000 per- mile right-of-way (RoW) fee on submarine cable projects was greeted enthusiastically by industry, which lauded revisiting of controversial “final” rule. NOAA earlier this year released report that would have changed land valuation policy on telecom infrastructure crossing National Marine Sanctuaries, TELROW Coalition Exec. Dir. Eric Myers said: “We are very pleased that they've taken the opportunity to review its policy and invite public comment.” He said NOAA’s revised fair market value analysis, which it published Fri. in Federal Register, would give industry significant 2nd chance to weigh in on issue. Agency in Jan. provided 15-day window, which many stakeholders said left insufficient time to prepare statements. Reopening comment period is “strong sign that the new Administration is going to take time to look at this… The last Administration didn’t provide that opportunity.” However, Ocean Conservancy said it would caution NOAA against making it easy for industry to use protected waters as cheaper alternative to terrestrial fiber deployment. Conservancy spokeswoman said govt. should ensure parity in fees charged for land and water routes to avoid providing incentives to lay cable in “crown jewels” of U.S. waterways: “We think that the fees should be set to discourage cable laying in marine sanctuaries… Fair market value should be fair market value. These are national treasures that we should not be giving away.”
FCC granted petition by Central Mich. U. (CMU) for waiver of its cross-ownership rule to enable university to operate noncommercial station WCMU-TV Mt. Pleasant, which overlaps service area of its video distribution system on university campus. Commission said it didn’t believe policy objectives of cross- ownership rules would be hurt by granting university waiver because as noncommercial station, WCMU-TV didn’t compete economically with other local broadcast stations. As such, CMU doesn’t have same incentives to indulge in anticompetitive conduct that commercial cable operator might because it doesn’t compete with other local stations for ad revenue. Also, CMU’s video system isn’t available outside university, it said. Commission said it avoided addressing issue whether CMU’s video distribution system was cable system because it had decided to grant waiver. In its petition, CMU had said its video distribution system wasn’t cable system because it didn’t have subscribers and didn’t use public rights-of-way.
Ind. Utility Regulatory Commission (IURC) ruled against idea of allowing telecom customers or providers to bridge calls across boundary between adjacent extended area service (EAS) calling areas. IURC, at end of almost 3 years of study, concluded EAS bridging was contrary to public interest because it would turn what normally would be toll call into local call and thereby unfairly deprive local exchange carriers of per-min. access charges. With bridging in place, users would dial local number connected to dedicated line that crossed EAS boundary and terminated at switch on other side. They would get second dial tone and dial desired number that would be local call in adjacent EAS calling area. Without bridge, call to adjacent EAS area would be toll call. IURC said EAS bridging would deprive local exchange carriers of adequate compensation for use of their facilities, unfairly impose costs on them and would be anticompetitive and discriminatory.
FCC in 3-2 vote approved purchase of 10 Chris-Craft TV stations and subsidiaries BHC Communications and United TV by News Corp. subsidiary Fox TV Stations (FTS) Wed., 11 months after $5.35-billion deal was announced (CD Aug 15 p1). In doing so, agency issued temporary waivers for 3 separate ownership rules -- TV duopolies, 35% national TV audience cap and newspaper-broadcast cross-ownership cap. However, it’s likely that some or all of those waivers will become permanent based on actions in U.S. courts and in FCC rulemakings, something that upset dissenters, Comrs. Tristani and Copps. Tristani was particularly insistent in her opposition to acquisition and found herself in written tussle with Chmn. Powell.
Proposed media cross-ownership limits have “no connection to the realities imposed by today’s mass media marketplace,” Newspaper Assn. of America (NAA) said following announcement by Senate Commerce Committee Chmn. Hollings (D-S.C.) about plans for legislation on media ownership (CD July 18 p1). NAA Pres. John Sturm called bill “a sad vestige of the past, just like the newspaper-broadcast cross-ownership rule itself.” Rules are being loosened for other media, Sturm said, and there “has never been any showing of harm, anticompetitive behavior or abuse associated with newspaper ownership of broadcast properties in the same market.”