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FCC preparing to regulate cable industry

Mon, 11/12/2007 - 8:35am
Brian Santo

The FCC is laying the groundwork for regulating the cable industry. The Commission plans to find that the cable industry has achieved a specific measure of dominance in the industry, which would trigger the implementation of a provision in the 1984 Cable Act.

The relevant clause in the Act is the so-called 70/70 rule. Once the FCC concludes that cable television is available to at least 70 percent of American households, and at least 70 percent of those households actually subscribe to a cable service, the FCC would automatically be given broad authority to regulate the industry.

NCTA CEO Kyle McSlarrow said, “Every independent analysis of the marketplace shows that cable serves less than 70 percent of the nation's households and even the FCC staff concluded last year that cable was well short of this threshold. The provision itself is a relic of decades old regulation and there is no basis for reviving it now; twisting statistics in order to breathe life into this rule is simply another attempt to justify unnecessary government intrusion into a marketplace where competition is thriving and new technology is providing consumers more choices, better programming and exciting new interactive services.”

The FCC is apparently using a calculation of penetration rates from Warren Communications News that does not include any cable system with fewer than 36 channels – a provision dictated by the 1984 Cable Act. By calculating the penetration of only those companies with 36 or more channels, cable’s penetration rate is close to the 70 percent target, according to 2005 statistics reported in 2006.

The NCTA quotes statistics compiled by SNL Kagan that cable penetration – including all cable systems – as of June 2007 is only 58.3 percent.

The FCC itself in published documents (including the Commission’s most recent annual report in 2006) acknowledges that there is broad disagreement whether both qualifiers (“prongs” in FCC parlance) of the trigger – penetration of all households and penetration of cable subscribers – have been met. Tables published in the FCC’s 2006 annual report contain statistics showing neither prong has been met, and that penetration of all households is not even close.

Nonetheless, FCC Chairman Kevin Martin is readying to make the case that the provision giving him power to regulate the industry has indeed been triggered.

Martin has consistently berated the cable industry for rising cable rates, and has repeatedly championed the so-called a la carte approach to cable programming, which would allow subscribers to choose and pay for only those channels they desire. Invoking the 70/70 rule would give him the authority he needs to force the cable industry to adopt any measures he deems necessary.

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