FCC Meeting: Data Do Not Establish 70/70 Finding

Cable Leased-Access Rates Cut; TV Broadcasters Faced Enhanced Reporting Requirements 11/27/2007 03:50:00 PM Eastern

Federal Communications Commission chairman Kevin Martin took flak from Democratic and Republican colleagues alike as the FCC voted late Tuesday night to require cable operators large and small to come up with a raft of data on their homes passed and subscriber counts within 60 days.

Kevin Martin

But that was still a victory for cable that came after the FCC's monthly meeting was delayed for almost 12 hours due to ongoing negotiations over contentious items that had at least one commissioner (Jonathan Adelstein) calling the process “shameful” and “embarrassing” and a sign that the commission was in disarray.

The commissioners also voted to approve a cut in cable's leased-access rates and to require enhanced reporting requirements for TV broadcasters, although various commissioners dissented in parts of those decision, and commissioners Robert McDowell and Deborah Taylor Tate voted against the leased-access changes, leaving Martin with two Democrats to make up his majority there.

Martin was also criticized by commission Republicans and Democrats alike for not providing sufficient notice for some items voted on or sufficient time for public comment. Martin countered that all of the items had been available for at least three weeks.

As expected, the vote to adopt the 2006 video-competition report did not include a finding that cable had met the so-called 70/70 test for market concentration. Martin had proposed backing off that assertion Monday after it became clear that he could not get enough Democrats or Republicans to back the finding. If the FCC commissioners had approved that finding, cable could have potentially been subject to a host of new regulations to promote programming diversity.

Martin had suggested to The New York Times that the reregulatory benchmark had been met -- a leak that produced a flood of criticism. Instead the report said the only way to definitively make that determination is after collecting data from the cable industry.

A draft of the report circulated to the commissioners had originally concluded that cable had met that test based on information from only one source, Warren Communications, rather than the several sources -- Nielsen, Kagan, the FCC's own forms -- that had been included in previous forms. Martin said Warren was the only source because he had proposed it to be the most accurate and thorough, not because it was the only one of the four traditional data sources that had cable topping the 70% subscriber threshold.

The report is an annual one to Congress on the state of competition in the video marketplace.

Democratic commissioner Adelstein said he would not hesitate to regulate cable if he were convinced that it had indeed passed the 70/70 threshold, but he suggested that the chairman cherry-picked the data that supported regulating cable -- and suppressed dissenting data -- which was the wrong way of arriving at what might ultimately prove to be the right finding. "We can't cook the books to serve a political agenda," he said.

Republican commissioner McDowell also complained that there had been an effort to omit, "or, as some have suggested, suppress," data from the FCC and elsewhere in favor of a study that was inserted into the record only several weeks before, without scrutiny or comment, because it was the only data that would justify a "cascade" of unnecessary regulation of the cable industry.

Martin also came under fire for not supplying the other commissioners with the FCC's own data that showed that 54% of homes passed subscribe to cable, much less than the 71.4% the Warren data found. Both McDowell and Adelstein pointed out that they had not even seen those figures until 7 p.m. Monday because the original draft had "mysteriously redacted," as Adelstein put it, all but the Warren numbers supporting the 70%-plus finding. Martin countered that they had not asked for those data before then.

The FCC will require all cable operators to supply the number of homes passed and the total number of actual subscribers, including those in apartments and other multiple-dwelling units. Media Bureau chief Monica Desai had no comment about what guidance the FCC would give operators about the definition of what constituted a home passed by cable -- i.e., unoccupied homes or second homes. The larger the homes-passed figure is, the tougher it is for cable to reach that 70% subscriber figure.

McDowell was concerned that some smaller operators might not be able to come up with all of the data the FCC wanted and wondered whether that gap would be used to "concoct projections" that cable had met the threshold. "Stay tuned," he added ominously.

The FCC gave the cable industry 60 days to come up with the information, but that is 60 days after the order is adopted in the Federal Register, so no determination will be made about cable's competitive status until the first quarter of 2008. The report will not be issued to Congress until then, though the FCC also voted to launch the next video competition inquiry (for 2007).

In a 3-2 vote, Martin, joined by Democratic commissioners Michael Copps and Adelstein, capped the rates cable can charge independent programmers to lease capacity at 10 cents per subscriber, per month, a cut estimated at some 75% and based on a formula change that sets the rate on the presumption that cable operators will drop their least profitable channel -- a "least for least" exchange -- rather than one based on the average price of all channels. The commission did not cut the rate for home shopping and infomercial channels, though, saying that could encourage them to migrate to leased access.

McDowell said the change in the leased-access formula was unnecessary, that it would prop up an unworkable business model and that discriminating on the rate based on the type of programming -- home shopping or infomercial -- would be unlikely to pass constitutional muster.

The FCC also voted to approve enhanced disclosure requirements for broadcasters, including to require TV stations with Web sites to place all but their public files, with the exception of their political file, on those sites. They also have to publicize the existence of those files on air twice daily. New quarterly reports on programming in various categories -- political, public affairs, independent programming -- must also be filed with the commission.

Copps called it a "solid step in the right direction" and "very, very welcome," though falling short of "real public-interest standards." He said that if the FCC ever gets serious about a licensing regime, it will have more data to base licensing decisions on. "What we do here today will be vindicated by what we do going forward," he added. Adelstein called it a long overdue move and a "glorious day," but also pointed to the unresolved inquiry into just what "substantive public-interest obligations" TV stations should be reporting.

Adelstein called on the commission to complete that inquiry before taking any action on media ownership changes generally.

McDowell said he was concerned that the Web-site-posting requirement and 60-day deadline for doing that would have an adverse impact on smaller stations, and he dissented from the 60-day conversion deadline for paper files to the Internet -- a requirement that he said would also be an undue burden on smaller stations trying at the same time to make the digital-TV transition. He also said he was concerned about the new standardized reporting forms that head back in the direction of "ascertainment" requirements jettisoned by an earlier commission, saying that the FCC threatened stations' First Amendment rights and that he would not aid or abet that, dissenting from that part of the order.

Martin said the move would help broadcasters to showcase the good work they are doing and allow the public to better monitor that, adding that it will shine a bright light on stations' efforts.

Not included on the FCC's meeting agenda was arbitration for program-carriage impasses, which the chairman had been considering, according to McDowell.

National Cable & Telecommunications Association president Kyle McSlarrow was generally pleased with the outcome, particularly considering that cable dodged a big bullet, at least temporarily, with the pushback on the 70/70 finding, although McSlarrow was confident that it was more than a reprieve.

“We are pleased that the commission dropped both a proposal to impose a new multicast-must-carry mandate on cable systems and a proposal that would have encouraged government intervention in private carriage negotiations," he said. "Rejecting these items sends an important message that consumers are best served by marketplace forces, not government micromanagement."

McSlarrow added, "Today’s FCC action also strongly affirms that accurate data are critical to objective policymaking. We applaud the leadership of each commissioner who questioned and withstood the attempt to use incomplete data in order to justify greater regulation that is completely unwarranted by the competitive marketplace."

He concluded, "As we have repeatedly made clear, our industry welcomes the opportunity to supply and rely on the best available data. As already required by law, cable systems representing more than 75% of all subscribers annually report to the FCC total subscribers and homes passed. Additional data will confirm that the commission was correct in rejecting the 70/70 finding today."

Dropped from the agenda

was a proposal to allow stations to lease DTV spectrum to minorities and others