Effective Competition Draft Raising Questions Among Some FCC Democrats
A push by NAB and public interest groups to limit a change in cable effective competition rules to small cable is getting traction in Democratic eighth-floor FCC offices, while Republican offices remain favorable to the draft order as originally circulated (see 1505150035) by Chairman Tom Wheeler, said broadcast, cable and agency officials in interviews. They said that with a congressionally mandated deadline for the rule change coming Tuesday, the Democrats have concerns about the draft. Some cable industry officials believe a majority of the commission is favorable to making effective competition a rebuttable presumption for all cable, as the draft proposes and as broadcasters oppose.
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If Wheeler sticks with the draft, he faces a scenario where he'd back a rule opposed by Democratic lawmakers and many public interest groups, said industry officials on both sides of the issue. “The FCC’s proposal to update and streamline its procedures for determining ‘effective competition' is entirely appropriate given the dramatic changes in the video marketplace that have occurred over the past two decades,” said an NCTA spokesman. A Media Bureau spokeswoman declined to comment.
The short time frame imposed by the Satellite Television Extension and Localism Act Reauthorization (STELAR) means the FCC hasn’t had time to study many aspects of a nationwide rebuttable presumption of effective competition, said a joint filing in docket 15-53 by NAB and 12 public interest groups including Common Cause, the National Hispanic Media Coalition and Public Knowledge. “Many questions have been raised in this proceeding that have not been -- and cannot be -- fully addressed in the truncated timeframe available.” Those questions include how the change will impact “cash-strapped” local franchising authorities, how AT&T's planned buy of DirecTV (see 1505270049">1505270049) would affect the direct broadcast satellite company's status as a cable competitor, and how many petitions for effective competition have been withdrawn by cable carriers, the groups said.
The NPRM proposing the rule change emphasized that virtually all cable petitions for effective competition are currently granted, said Public Knowledge Senior Staff Attorney John Bergmayer. That’s “a flawed metric," he said. Petitions that don’t meet the Media Bureau’s standards are never submitted, he said.
To give itself more time to study a decision while still meeting the statutory deadline, the FCC should stick to the scope required by STELAR, and provide relief only to small cable systems, the joint filing said. “There shouldn’t be a rush to judgment,” said Free Press Policy Counsel Lauren Wilson in an interview. Changing the rule could have “a profoundly negative impact on consumers,” NAB said in a news release. The FCC shouldn’t treat large companies like Comcast the same as smaller cable companies that face vastly different economic situations, said Bergmayer and Wilson.
“Everyone knows cable isn’t dominant any more,” said Mediacom Group Vice President-Legal and Regulatory Affairs Tom Larsen. “These are outdated rules that need to go away.” Mediacom doesn’t face rate regulation anywhere in its footprint, and so isn’t affected by the draft rule change, Larsen said. NAB has raised concerns that a nationwide effective competition designation would lead to cable companies bumping broadcasters from the basic tier once they are no longer bound by rate regulation, something that hasn’t happened in areas where effective competition petitions were granted, said cable industry lawyers. Market forces prevent it from occurring, Larsen said. "If I can’t stop them from charging more [in retransmission consent fees] every cycle, how do I stop them from demanding to be on the basic tier?”
Industry officials who support the rebuttable presumption rubric said they're surprised by the level of NAB’s opposition to the FCC draft. With NAB CEO Gordon Smith visiting commissioners and their aides (see 1505070042), legislators weighing in, and filings implying future legal action, broadcasters appear to be “calling in all their chits” to fight the matter, said a cable official. Many cable industry officials said they expected STELAR rules on good-faith negotiation in retransmission consent to be of more concern to broadcasters than effective competition changes (see 1505070046). Broadcasters believe they have the better argument on effective competition, and that they can win, broadcast attorneys said. "Congress instructed the FCC to end the effective competition presumption only for small cable systems," said an NAB spokesman. "There is no justification for the Commission going beyond specific language in the STELAR bill.”