FCC APPROVES ITV INQUIRY, BACKING OFF PROPOSED RULEMAKING
By 4-1 vote, FCC adopted notice of inquiry (NOI) on interactive TV (ITV) services Thurs., starting formal proceeding that it promised when it approved AOL’s takeover of Time Warner (TW) with additional regulatory conditions late last week. But Commission backed away from weightier, more urgent proposed rulemaking on ITV issue that its Cable Bureau staff had recommended, bowing to strong lobbying from cable, to disappointment of consumer advocates and other cable critics. Move follows regulatory conditions imposed on AOL-TW deal last month by FTC that prohibited merged company from interfering with content supplied by other ISPs and ITV providers or discriminating against such competitors (CD Dec 15 p1).
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In 22-page NOI, FCC seeks comment on “a suitable definition of ITV service.” It identifies 3 major technical “building blocks” for ITV service -- video pipeline, high-speed Internet connection and ITV set-top box -- and asks whether cable or any other pay TV provider “will have a substantial advantage in delivering ITV services.” Agency also asks whether vertically integrated pay TV provider that offers its own ITV services “would have the incentive in addition to the ability to discriminate against unaffiliated ITV service providers.” In addition, NOI explores idea of imposing “a nondiscrimination requirement” on cable operator or other pay-TV provider “with a substantial advantage in delivering ITV services.” Finally, inquiry seeks comment on jurisdictional issues and FCC authority over ITV services.
Outgoing FCC Chmn. Kennard, who pledged action on ITV issue last Fri. after Commission approved AOL-TW deal, called proceeding “valuable step” in ensuring “a robust, competitive [ITV] marketplace” for public. “ITV service has the potential to bring huge benefits to the American consumer, not to mention substantial revenues to service providers,” he said. “Although ITV services are in the early stages of development, the Commission would do well to get ahead of the curve. It seems clear to me that cable television will be an important platform for delivery of ITV services, at least in the near term, and I am concerned that a vertically integrated ITV service provider might have the incentive and ability to discriminate against unaffiliated ITV service providers.”
In separate statement, Democrat Comr. Tristani, who voted for inquiry, said she wished agency had gone further by undertaking proposed rulemaking. “The world of communications is constantly and rapidly changing,” she said. “This Commission must move promptly to ascertain the public interest in nascent industries to ensure appropriate measures are timely vetted and resolved.”
Republican Comr. Furchtgott-Roth, sole opponent of ITV proceeding, said it was “much too premature” for FCC to address issue. Although NOI is less heavyhanded than proposed rulemaking, he said, “it is no less damaging to raise the specter of government regulation… for services that are still in their gestational period.” Furchtgott-Roth also expressed “serious reservations that the Commission has the legal authority to address cable interactive services.” Citing Section 624(f) of Telecom Act, he contended that “it is arguable that the Commission is prohibited from commencing a rulemaking proceeding on the subject.”
Not surprisingly, cable officials, who lobbied heavily against proposed rulemaking, applauded FCC’s move to tread more lightly on ITV regulations but questioned need to do anything at all. “We're pleased that the Commission has decided to conduct a fact-finding inquiry rather than a rulemaking which presumes a regulatory outcome,” NCTA Pres.-CEO Robert Sachs said. “But asking dozens of hypothetical questions about regulating a business which has yet to take form still puts the cart before the horse, in regulatory terms. Interactive TV is just starting to develop and is likely to evolve in different ways. There is no evidence to suggest that government regulation is called for here.”
Disney officials, consumer groups and other critics, who pressed both FTC and FCC for action in AOL-TW review, welcomed move by FCC to examine ITV and provide forum for public debate. But, after pushing for proposed rulemaking, they criticized Commission for not moving more quickly and aggressively. “Once again, this is too long in coming here,” said one consumer advocate, who believes agency should have intervened earlier. “This has been a Democratic Commission without any kind of courage or spine.”