FCC Approves Telco-Friendly Video Rules
LR Cable News Analysis Alan Breznick, Cable/Video Practice Leader, Light Reading 12/20/2006
The new rules set a 90-day cap for local authorities to approve or deny video franchise applications made by incumbent telcos who already hold public rights-of-way for their wires. The order sets a 180-day cap for municipalities to act on applications by new TV providers that don't already have the same rights-of-way.
The new franchising rules, strongly opposed by the cable industry and key Democrats, forbids local governments from imposing tighter build-out requirements on new video entrants than those faced by cable incumbents. In addition, the rules require municipalities to count certain franchising costs towards the five percent franchise fee that can be collected from the new video players.
Led by FCC Chairman Kevin Martin, the Commission approved the new franchising rules by a 3-2 margin as it released its latest annual cable pricing survey, which showed that monthly basic and expanded basic cable rates continue to climb faster than the overall inflation rate. Specifically, the study found that cable rates rose 5.2 percent in 2004 and 93 percent over the past decade.
"Cable competition can make a difference and can impact cable bills," Martin said. The pricing survey also showed that cable rates run 17 percent lower in markets where the incumbents face wireline competition from overbuilders, municipal cable providers, and telco TV players. Competition from satellite TV providers, however, appears to have little effect on cable rates.
The Commission approved the new franchising rules despite strong opposition from the agency's two Democratic members, Jonathan Adelstein and Michael Copps, who both voted against them.
Copps and Adelstein questioned the agency's reasoning that municipalities have significantly blocked the entry of competitors into the video market with cumbersome franchising requirements and lengthy reviews. The two Democratic Commissioners expressed concern about the loss of control by local franchising authorities and questioned whether the FCC has the legal right to override the local authorities.
Moreover, the FCC passed the new rules despite an unusually pointed warning from the incoming Democratic chairman of the House Committee on Energy and Commerce, which has jurisdiction over the Commission. In a letter sent Tuesday, Rep. John Dingell (D-Mich.) also questioned the agency's legal authority to overhaul the cable franchising rules.
"It would be extremely inappropriate for the Federal Communications Commission to take action that would exceed the agency's authority and usurp congressional prerogative to reform the cable television and local franchising process," Dingell wrote. He asked Martin to provide statutory and legal citations" for the rules changes, setting a Jan. 3 deadline for a reply.
Finally, the FCC approved the new telco-friendly rules despite heated opposition from the cable industry, which has complained that the rules will favor phone companies over cable providers. In a press briefing Tuesday, National Cable & Telecommunications Association (NCTA) President Kyle McSlarrow lashed out at Martin and the Commission, condemning them for what he termed a "micromanagement" of communications policy and "fundamental misunderstanding" of the cable industry.
In a prepared statement after the agency's vote this afternoon, McSlarrow pulled his punches somewhat. He praised the FCC for paring back "some of the more troubling proposals that had been floated in recent days." He also applauded the agency for stepping back from "pre-empting all state franchising laws" and committing to act within six months on the idea of regulatory parity.
But McSlarrow still slammed the FCC's order for not setting up "a level playing field" for all video players. "We don't believe the Commission has the legal authority to establish separate regimes for incumbents and new entrants in today's highly competitive marketplace," he said.
— Alan Breznick, Site Editor, Cable Digital News