FCC Votes Unanimously to End Cable Programming Exclusivity Ban

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By Paul Barbagallo  

The Federal Communications Commission voted unanimously Oct. 5 to let expire a 20-year-old rule that required cable operators to make their affiliated programming available to competitors.

The FCC on a 5-0 vote concluded that retaining the rule, originally put in place to boost competition in the multichannel video programming distribution market, was no longer in the public interest.

“The FCC is focused on promoting competition and protecting consumers in the evolving video market,” FCC Chairman Julius Genachowski said in an emailed statement. “Today's [Oct. 5] unanimous decision enables the FCC to continue preventing anticompetitive video distribution arrangements through a legally sustainable, expeditious, case-by-case review.”

As part of its decision, the FCC added an exception under which competitive pay-TV providers can file complaints with the agency any time a cable operator withholds a regional sports network channel. The FCC will have six months to resolve complaints.

“It is my hope that such a timeline will get rid of the uncertainty, expense, and frustration that comes with prolonged litigation before this agency, and resolution within six months will allow unsuccessful complainants to evaluate their options and proceed accordingly,” Democratic Commissioner Mignon Clyburn said in a statement.

Notice of Proposed Rulemaking Issued.

In including the new exception, the FCC also issued a notice of proposed rulemaking to solicit public comment on whether the agency should establish a rebuttable presumption that withholding cable-affiliated sports channels from rivals would be anticompetitive.

In the weeks leading up to the commission's vote, representatives of Dish Network Corp., DirecTV, and newer phone-company market players AT&T Inc. and Verizon Communications Inc. had lobbied the agency's Media Bureau and general counsel's offices to either extend the ban on exclusive contracts between cable operators and their cable-affiliated programmers for another five years, until 2017, or limit the ban to all so-called “non-replicable” programming, such as regional sports network programming.

According to a recent survey commissioned by Verizon, 54 percent of all viewers and 77 percent of sports fans in the New York metropolitan area consider the availability of regional sports channels in high definition an important factor in deciding whether to switch video providers.

“While we appreciate the commission's willingness to make some changes to this order, today's [Oct. 5] action is likely to make it more difficult to build and operate broadband networks, especially in rural communities where revenues from offering competitive video services are essential in order to make a business case for broadband deployment,” said Walter McCormick, president and CEO of the USTelecom Association. “There is near universal agreement in the record in support of continuing the commission's long-standing prohibition on the ability of large cable companies to withhold critical programming as a tool for suppressing the ability of alternative providers to compete--including support from small cable companies, rural telephone companies, satellite providers and public interest groups.”

The Independent Telephone and Telecommunications Alliance, whose members include CenturyLink, Fairpoint Communications, and SureWest and all offer a pay-TV service to consumers, similarly argued that the ability to offer a “comprehensive lineup of diversified programming options that appeal to a wide audience and a variety of interests” is critical for competitors, particularly smaller, newer entrants.

But the National Cable and Telecommunications Association, which represents the nation's largest cable operators, lauded the FCC's decision, given the “robust and irreversible competition that characterizes today's video marketplace.”

Vote Guided by 2007 Court Ruling.

The FCC's vote was guided by a 2007 court decision by the U.S. Court of Appeals for the District of Columbia Circuit in which a three-judge panel suggested that by 2012 the cable industry's dominance in the multichannel video programming distribution market will have “diminished” enough that the “commission will weigh heavily Congress's intention that the exclusive contract prohibition will eventually sunset.”

The dominance of the cable industry has waned since 2007, the last time the FCC extended the rule, the agency said.

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