FCC Commissioners May Split on Cable Franchise, DTV Orders

Commissioner Robert McDowell may be the swing vote. He has concerns about the draft order circulated by FCC Chairman Kevin Martin -- but also believes it could be a good idea and hasn’t decided which way to vote, sources said.

Commissioners Jonathan Adelstein and Michael Copps probably will dissent, said agency and industry sources. They believe the order usurps authority that Congress gave cities to strike deals with all video providers, FCC sources said. They voted in December 2006 against an order limiting the time that cities can negotiate with Bells and other new video providers for video contracts and letting the companies apply against a 5 percent federal franchise fee some public access and data fees paid to municipalities. The order was issued in March and appealed by cities to the 6th U.S. Circuit Court of Appeals, Cincinnati, which has signaled it will hear oral argument.

Adelstein and Copps likely will issue a dissent to the current franchise order that will be similar to their December comments, an FCC official said. Both dissents said the commission failed to gather data showing that cities were withholding franchises from phone and other companies. “Many people question, and continue to question, the Commission’s legal authority to do what it is doing,” Copps said at the time. In meetings Wednesday with McDowell and aides Commissioner Deborah Tate and Martin Municipal, groups said cable operators shouldn’t be allowed to void franchises. “Waiting until franchise expiration to apply the rules to incumbents is not unfair to them,” said a handout from the meetings with the National Association of Telecommunications Officers and Advisors, the National League of Cities, the National Association of Counties and others. “Incumbents are sophisticated bargainers.”

McDowell seems unconvinced that Martin’s draft order would let cable operators immediately take advantage of a reduction in franchise fees that Bells are entitled to under the March rulemaking, said an FCC official. Under the pending order, cable operators aren’t guaranteed the lower fees until their franchises expire unless they rewrite existing deals. McDowell may vote for the order because he believes ripping up contracts could hurt cities, an FCC official said. It could be difficult for cable operators to take advantage of section 625 of the Communications Act, allowing renegotiation of commercially impracticable franchises, because the FCC’s cable order doesn’t seem to use that standard, said another official: “The item doesn’t offer much relief.” But a third agency official noted that many cable operators have most-favored-nation clauses in franchise agreements entitling the companies to the same terms that other video providers get. The problem is that not all cable operators have such a clause in their contracts, an industry lawyer said.

The three commissioners haven’t voted, so there’s time for Martin to propose a compromise to get his colleagues to sign on, FCC officials said. Martin also appears to have some convincing to do on a controversial DTV carriage order slated for consideration at the meeting. Adelstein, Copps and McDowell haven’t voted on it, FCC officials said. Some commissioners have concerns about whether it would be constitutional and whether cable operators should be required to do what they've already largely committed to doing voluntarily, said FCC and industry officials. Broadcasters contend that cable operators should be required to convert TV stations’ digital signals into analog after the transition and that such a rule wouldn’t violate the Constitution. NAB officials and Association for Maximum Service TV President David Donovan met Tuesday with an aide to Tate to press for what they call a “'viewability'” proposal, an ex parte filing said. Skeptical cable lawyers and FCC officials call it a dual-carriage mandate. NAB and MSTV contended the Act requires the signals of must-carry TV stations to be provided to every cable subscriber. “Cable operators argue they should be able to deliver video programming to analog sets, but those sets should be read out of the broadcast must carry law,” said a handout from the meeting. “No statutory language supports their argument and it flies in the face of Congress’s effort to ease the transition” to digital.

NCTA may have a way for Martin to get cable operators to carry DTV broadcasters’ analog signals while appeasing the cable industry’s concerns. In exchange for the agency’s deciding to not adopt the order, NCTA officials proposed to some commissioners that the industry would agree to transmit for three years the digital and analog signals of must-carry TV stations in most markets, a cable lawyer said. Cable systems with limited capacity or bandwidth constraints would be exempt from the deal, which would ensure that the majority of analog subscribers continue to get must-carry stations after Feb. 17, 2009, the lawyer said. NCTA President Kyle McSlarrow told Adelstein, Copps, Tate, McDowell, a Martin aide and Media Bureau Chief Monica Desai about “various voluntary cable operator approaches involving carriage of a must-carry broadcaster’s digital signal converted to analog,” said an ex parte filing on the Tuesday and Wednesday meetings. Several industry and FCC officials said Martin may pull the carriage order from the agenda to give commissioners time to consider NCTA’s proposal. An FCC official said the plan is promising and deserves a close look. NCTA’s proposal is “well within the ballpark of achieving the goal and they seem in a good faith way to be willing to negotiate,” the source said.

A vote on an order circulated eight days ago by Martin (CD Aug 30 p3) to bar exclusive deals between apartment buildings and video providers is a way off, said FCC officials. The order will likely be voted on at the October commission meeting, a cable lawyer said. It could also be voted on after this month after Tuesday’s meeting, FCC officials said, noting that no votes besides Martin’s have been registered. Handing a victory to Verizon and other Bells, the order would bar cable operators, satellite providers and other pay-TV companies from signing exclusive deals with apartment buildings and other housing developments, said an FCC official. The official said the order refers to section 628 of the act. It goes beyond expectations of some industry lawyers that Martin wanted only to bar future exclusives. Instead, any exclusive deal would be banned. - Jonathan Make