The cable industry’s petition to overthrow Federal Communications Commission program access rules has been denied.
Cable companies, including Comcast and Cablevision (both petitioners), Time Warner Cable, Cox Communications and others that own both distribution networks and content arms will have to abide by rules passed into law in 1992 that compel them to share access to their programming with rivals.
The 1992 law directed the FCC to review conditions after 10 years and gave it authority to extend those rules if it deemed their continuation necessary. The FCC extended the rules in 2002, and again in 2007.
Armed with an earlier, largely unrelated court decision that established that market conditions had indeed changed enough to change certain rules binding the cable industry, Comcast and Cablevision both appealed to have the FCC’s 2007 ruling revisited and, ideally, reversed. But first they needed permission to get it revisited.
The cable companies argued that competition has increased to the point where the rules are not needed, that they are discriminatory given that they apply to cable and not to its competition, that they infringe cable’s First Amendment rights, and that the FCC was applying the rules in a capricious and arbitrary manner.
The U.S. Court of Appeals for the District of Columbia did not reject the arguments outright, but still denied the petitions. The FCC does not have to revisit its 2007 decision.
The appeals court’s bottom line was that the FCC has been acting reasonably in its evaluations of whether or not to extend the rules, and that although the competitive landscape has indeed changed dramatically since 1992, it analyzed those conditions and decided they haven’t changed enough to merit reconsideration of the program access rules.
The court explained that the four operators named have in fact consolidated their hold on the most popular pay-TV programming, and that competition can still be harmed if they decide to withhold that programming from competitors.
Vertically integrated companies had figured out ways to circumvent the rules under certain conditions, but in January, the FCC closed what had been referred to as the terrestrial loophole to the rules. The 1992 law specifically mentioned distribution by satellite. Comcast, Cablevision and Cox have been accused of getting around those rules by distributing programming over landlines.
FCC Chairman Julius Genachowski released a statement, unsurprisingly supporting the appeals court’s decision.
Smaller cable companies, who in many cases are among the competitors to their larger brethren, have complained that the big MSOs that also own programming have been abusing their market power, and small ops agreed with the decision but said that merely compelling vertically integrated companies to negotiate for program access doesn’t go far enough – the vertically integrated companies are still free to set discriminatory pricing, effectively restricting access to small competitors.
The American Cable Association issued a statement that read: “While we are pleased that the court recognized today that the FCC had substantial evidence to conclude that vertically integrated cable companies have the ability and incentive to withhold ‘must-have’ programming from competitors, we maintain that the current program access rules are demonstrably ineffective for competitive pay-TV content buyers because they permit rampant, unjustified price discrimination.
“Moreover, the rules fail to provide for an automatic right to continued carriage during the pendency of a complaint and do not offer any rate-setting mechanisms. For these reasons, ACA asserts that program access rules will not alleviate the substantial harms that would result from the Comcast-NBCU merger and that structural or behavioral remedies must be put in place by the Federal Communications Commission and the Department of Justice before that deal is approved.”
CableVision released the following statement: “Like the must carry and retransmission consent regime that allowed ABC to blackout the Oscars for 3 million New York households this week, the program access rules are based on an outdated and obsolete view of the competitive landscape. In today’s highly competitive video marketplace these rules do nothing but tilt the playing field in favor of phone companies and broadcasters to the detriment of fair competition and consumers.”