CONSUMER GROUPS: FCC USES WRONG STANDARD TO MEASURE SUBSCRIBERS
As clock ticks nearer to 180-day mark on proposed merger of AT&T Broadband and Comcast, coalition of consumer groups is challenging FCC’s standard in determining subscriber numbers. “Recent disclosures of questionable subscriber counts and even outright fraud by multichannel video programming distributors (MVPDs) demonstrates that the Commission cannot reasonably rely on ‘generally accepted industry data,'” said Consumer Federation of America (CFA), Consumers Union (CU), Center for Digital Democracy (CDD) and Media Access Project in filing last week at FCC. Groups were referring to revelations that Adelphia had fudged its subscriber counts, that Charter counted cable modem customers as subscribers of basic video service even if they didn’t actually get TV service, and that DirecTV had counted people who were interested in service but hadn’t actually signed contract. FCC spokeswoman declined comment. NCTA spokesman said group wouldn’t comment until it reviewed filing.
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Consumer groups said FCC should use “more reliable” standard of “homes passed” or collect total subscriber data itself. Alternatively, they said, it could require MVPDs to regularly file subscriber counts with Commission under penalty of sanctions for falsifying information. “Given the size of recent mergers, even the difference of a few hundred thousand subscribers can make the difference between a merger that violates the ownership cap and one that does not,” groups said, referring to 30% horizontal ownership cap which has been struck down by courts. Commission must have accurate information, groups said, rather than depend on “third parties beholden to those with the incentive to manipulate the data.” Groups said Commission should put companies “on notice” that it would consider “deliberate overcounts” provided to private entities or SEC or other govt. agencies “evidence of bad character” that would jeopardize companies’ licenses. Groups were particularly concerned about potential of AT&T Comcast, MAP Assoc. Dir. Harold Feld said in interview. He said merger was “really over” subscriber limit, although companies’ combined 22 million subscribers didn’t represent 30% of MPVD market. “The only way you can get a sense of their market power is through ‘homes passed,'” Feld said. Comcast spokesman declined to comment on how FCC evaluated subscriber counts.
Groups’ filing came just as cable industry executives were set to unveil new set of accounting standards that they hoped would ease jitters on Wall St. about entire sector of cable stocks (CD Oct 18 p10). Top executives of major MSOs, including Charter CEO Carl Vogel and Insight Communications CEO Michael Willner, were to meet in N.Y.C. Oct. 21 to reveal their plan to analysts. But that wouldn’t necessarily appease consumer groups, which appeared to be more concerned with FCC methodology. In particular, they criticized what they called the “flimsiness” of Commission’s rules on insulating companies’ separate interests, saying FCC had no “ability to discover violations.”
Groups filed their comments in several proceedings pending before FCC, including AT&T Comcast merger, in which Commission was examining companies’ plans to insulate AT&T’s interest in Time Warner Entertainment (TWE) from rest of company until it could sell that interest. “Absent safeguards, the public can be certain that the Commission’s rules will be violated,” groups wrote: “Only a structural separation that removes the ability of partners and officers to influence the actions of the licensee by making the interest attributable can protect the public from practical ongoing violations of the Commission’s ownership limits.” Comments came after companies did, in fact, agree to certain structural changes in their trust proposal for TWE. Recent FCC filings show that, among other changes, companies revised their proposal so designated trustee “shall not consult” with combined AT&T Comcast on voting matters, director appointments or approval rights when cable assets were sold by TWE. Before, AT&T Comcast would have maintained some rights in those matters. Revised trust agreement also won’t permit any communications related to management or operation of TWE except as required by tax, securities and other laws. Before, some communications between trustee and AT&T Comcast were allowed. Changes came after several consultations and questions from FCC staff. Clock runs out on FCC review of proposed merger Nov. 5, although several industry and govt. sources have said they expect Commission’s decision before then.