Some Judicial Pushback Seen in MDTC Effective Competition Order Challenge
First U.S. Circuit Court of Appeals Judge Sandra Lynch repeatedly challenged and expressed confusion about Massachusetts arguments on the FCC's LEC test, in oral argument Thursday. The Massachusetts Department of Telecommunications and Cable (MDTC) is challenging the commission's finding that the AT&T TV Now streaming service is effective competition to Charter cable service in Massachusetts and part of Hawaii, thus ending basic cable rate regulation there (see 1912230063).
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The FCC has consistently applied its LEC test for 27 years, asking such questions as whether the provider is physically able to deliver service and if customers are reasonably aware the service exists, and only now has the existence of a billing arrangement slipped in as part of the test, said Deputy State Solicitor David Kravitz.
Cutting him off, Lynch said the agency "never said, 'We set up a billing test.' I simply don't read the decision the way you do." She also pressed Kravitz on the state's position that AT&T TV Now isn't a direct offer to subscribers, as the LEC test requires. The FCC in the past defined direct offers differently than he is now, she told him. The FCC said AT&T TV Now is direct to subscribers because of direct customer relationships with subscribers, such as billing, "so what is unreasonable about that definition," she asked. As Kravitz replied with FCC regulations about what "offers" means, she interrupted: "I don't understand." Kravitz said that nothing about contractual relationships or billing relationships is in the regulations, and if the agency wants to incorporate them, it must amend its rules through a notice-and-comment proceeding.
Judge Juan Torruella briefly pushed FCC attorney James Carr about whether a third-party streaming service qualifies, since the LEC test requires the ability to physically deliver the service. Carr said MDTC is arguing a direct-to-subscriber service can't use third-party facilities for delivery, but the statute allows a whole class of MVPDs using third-party facilities to satisfy the LEC test, and the FCC saw that as indicating that offering a service means having a business or customer relationship with a subscriber.
Asked by Lynch whether the LEC test is satisfied if AT&T sells DirecTV, meaning the MVPD isn't owned by a LEC affiliate, Carr said the state could petition the FCC for recertification and show effective competition no longer exists there.
Judge Patti Saris repeatedly asked how much the cost of broadband is an impediment to the 32 Massachusetts communities in question in the FCC's effective competition finding. Carr said the LEC test doesn't require a service be offered to everyone in a given market, and other effective competition tests, like the competing provider test, specify an offer must be made to at least 50% of households in a franchise area. So even if the 20% of households in the Massachusetts communities that don't get broadband don't do so because of cost, AT&T TV Now still satisfies the statute, he said.
Asked by Torruella if Massachusetts' basic rate regulation "has been effective" until now, Carr said the FCC doesn't have a position on that, and the agency is only following Congress' wishes that a competitive market, rather than regulation, set the rates now that cable faces valid competition.