How Telcos are Affected by FCC Cable Limits Remains Uncertain
It’s unclear whether a national cable ownership cap approved 3-2 at last month’s commissioner meeting (CD Dec 19 p1) will apply to all cable and telecommunications companies selling TV, said industry officials. It’s clear that the cap limits to 30 percent the number of all satellite, telco-TV and cable subscribers a cable operator can have, said industry and FCC officials. Less certain is how the as-yet- released rule will apply to telecommunications companies. Satellite companies won’t be capped, said FCC officials and cable lawyers.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The uncertainty stems at least in part from how the term “cable” system and subscriber are defined, said a cable attorney. Section 613(f) of the 1992 Cable Act authorizes the commission to limit the number of subscribers that can be served by each cable operator, said the lawyer. Left unclear by commissioners and FCC Chairman Kevin Martin at the Dec. 18 FCC meeting is whether the new rule will affect telecommunications companies that also sell cable. “The open meeting was not a model of clarity on that issue,” said the attorney. “I believe, based on somewhat confusing commentary, that that’s still the case” and the cap applies only to cable operators in traditional sense, such as Comcast and Time Warner Cable, or to telcos that classify themselves as cable operators under FCC franchising and other rules. A cap remanded to the agency in 2001 by the U.S. Appeals Court for the District of Columbia Circuit applied only to cable operators, the lawyer said.
Verizon likely will be subject to the cap because it deems itself a cable operator under commission rules, while AT&T won’t because it doesn’t go through the franchising process, said FCC and industry officials. “It seems Verizon would be a ‘cable operator’ for regulatory purposes and, as a general matter, subject to the same rules,” said a company spokesman. “But, until we see the order, it isn’t possible to know exactly how it treats us.” An AT&T spokesman declined to comment. It’s unclear how the rule will treat Qwest, which sells a cable-like service in the Denver and Phoenix areas. A company spokesman declined to comment, as did USTelecom. An FCC spokeswoman declined to comment.
Martin implied that the cap could affect telco TV providers, in comments to reporters after the meeting. “Almost all the companies are well, well below the 30 percent cap, so there would have to be significant amounts of organic growth for years to be able to end up reaching the cap,” he said: “Most of the time companies have only bulked up in the context of acquisitions, and that would be the most likely place where it would come up in any kind of shorter to medium term.” Verizon had 717,000 FiOS pay-TV subscribers on Sept. 30, and AT&T’s U-Verse IPTV service had 126,000 customers.
In later remarks Dec. 18, Media Bureau officials clarified that the rule will apply only to cable operators. Like Martin, the officials stressed that even if the 30 percent cap applied, phone companies are a long way from bumping up against the limit. “If every single home passed by a telco chose to purchase service from them, that’s an unlikely outcome, so in general it’s not going to be a binding constraint on the telcos,” bureau economist Tracy Waldon told reporters. Bureau chief Monica Desai said AT&T and Verizon are “nowhere close to 30 percent.”
Cable lawyers and NCTA say it’s a double standard that their industry’s growth will be limited, but Bells don’t have limits on the number of their landline customers. “There is no evidence in the record to support any ownership limit, especially a cap that singles out one set of providers while allowing other companies including the largest telecom companies in the U.S. to keep growing without any limits,” said an NCTA spokesman. AT&T had 49.6 million “consumer connections” as of Sept. 30, including home phone lines, long distance service, broadband and video subscribers. Verizon had 25.6 million residential phone lines.
NCTA agrees that the rule probably will apply only to cable operators and to phone companies that deem themselves such under commission rules. “That definition certainly is no longer applicable in today’s competitive marketplace,” said the spokesman. “If a cap did withstand judicial scrutiny, which is unlikely based on the record, any cap should apply to all video providers equally.”
It’s unfair for the FCC to let phone companies grow by approving the merger of AT&T and BellSouth and other deals while limiting cable’s size, said cable lawyer Burt Braverman. “It calls into question why the commission would be approving mergers such as that at the same time it’s imposing an ownership cap on much smaller cable operators, and it raises in my mind the question whether there’s an inconsistency and infirmity in the commission’s recent ownership” decisions, he said: “Whatever the commission does should apply in an equal and non-discriminatory way across the board.” Cable consultant Steve Effros was also critical. “The solution to the entire issue since Comcast is the only one potentially affected is that Comcast start rolling out Internet Protocol boxes and stop calling itself a cable system,” he said. “All that does of course is show how foolish this thing is.”