Charter, Allies Opposing Cable Modem Rules in Set-Top Proposal
Charter Communications is opposing the part of FCC's set-top box proposal that would require cable modems be broken out on customers' bills and their cost unsubsidized. Saying it would be "more than happy" to note on customers’ bills that its modems are free, Charter in a blog post Wednesday said it "doesn’t stand to reason that customers will benefit from forcing companies to start charging for modems they currently give away." Compared with much of the set-top proceeding, cable modems are "a sleeper issue, but it offers a road map to undermining the retail market [for set-tops] and kill[ing] off the set-top box retail market before it ever gets off the ground," Andrew Schwartzman, outside counsel for Zoom Telephonics, told us Wednesday. Zoom repeatedly pushed the FCC for cable modem conditions on Charter's buys of Time Warner Cable and Bright House Networks (see 1511270051, 1511240028 and 1511040045) and has backed the FCC on the cable modem portion of the set-top proposal.
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The February set-top NPRM included a tentative conclusion that the agency should revise its rules and require multichannel video programming distributors to break out the charge for leased navigation devices, including modems and routers, and to cut customers' bills by that amount if they provide their own devices. It also asked for input on whether it should also bar subsidizing those equipment costs. An FCC official confirmed for us the final rules on the agenda for commissioner's Sept. 29 meeting include similar transparency requirements.
The agency in a statement Wednesday said the set-top proposal requires pay-TV providers "be fully transparent about the cost consumers pay for leased equipment used to access video programming. The goal is to uncover hidden fees and give consumers the ability to make informed choices. If a consumer chooses to purchase their own equipment at retail, our rules would require they no longer have to pay for the built-in cost on their bill."
Charter told us cable modem costs aren't baked into the bill, but an expense like truck rolls for installation or service calls is. "We view modems as part of providing a superior broadband service, and it makes us a stronger competitor by allowing us to offer better deals to our subscribers," it said in the blog. The company declined to say what amount it might put in that cable modem line item if the FCC required a breakout.
Charter also has taken its arguments to the eighth floor directly. In a meeting with Commissioner Ajit Pai aide Matthew Berry, Senior Vice President-Policy and External Affairs Alex Hoehn-Saric said a separate modem fee line item would fall short of the agency's stated goal of increased transparency and "actively harm consumers by creating a new fee that the vast majority of subscribers would need to pay," according to an ex parte filing posted Monday in docket 16-42. He also called the set-top proposal "arbitrary and capricious" for requiring imposition of a separate modem charge after the agency in its order approving Charter/TWC/BHN prohibited it from charging a modem fee as part of its low-income broadband services.
In a meeting with FCC General Counsel Howard Symons, Charter said the reclassification of broadband Internet access service under Communications Act Title II means the FCC now lacks the authority to regulate broadband equipment under Section 629, in an ex parte filing last week. The FCC "cannot now seek to have it both ways" by regulating under Title VI equipment used in BIAS operations, it said.
That new argument counters Charter's consent decree on cable modems it signed in May (see 1605110013), which took as fact that the Media Bureau has Section 629 jurisdiction over cable modems, Zoom said in an ex parte filing posted Friday. The cable modem maker also argued Charter was wrong in saying cable modems aren't used to access multichannel video programming services under Section 629, since a service doesn't need to be a cable service to be offered over those systems.
NCTA and AT&T also criticized the cable modem line item. Pointing to heat MVPDs took in the Senate Permanent Subcommittee on Investigations' Inside the Box report, the two in an analysis earlier this week (see 1609190048) said the agency "mandated or strongly encouraged MVPDs to provide such free equipment offerings" and questioned required line itemization for equipment.
"Rather than punishing providers by forcing them to charge a fee, the FCC should push other large internet providers to meet the challenge and eliminate these unnecessary fees," said Maryland State Senate Majority Leader Catherine Pugh (D), in a Huffington Post column this week criticizing the modem line item plan. "The FCC’s plan is a misguided solution in search of a problem, and goes against what pro-consumer policies should look like."
Schwartzman said a line item breakout is mandated by Section 629, which governs equipment used to access MVPD services. It's less clear how the agency would deal with the nonsubsidization requirement, he said, saying unless the FCC implements a law banning that requirement, cable operators will reduce set-top and cable modem prices significantly, raise the price of cable and/or broadband services some lesser amount and remove any incentives to buy a box at retail, killing the market. Charter is the only multiple system operator that doesn't break out its modem prices on customers' bills, Schwartzman said, but "the rest of the industry will take advantage" if there aren't rules banning subsidization.