FCC Unlikely to Yield Contract Control

Proposed item seeks ways to protect unique programming 3/19/2012 12:01:00 AM Eastern

Will the Federal Communications Commission
give cable operators a little more breathing room
on exclusive contracts for their co-owned channels?
What about if the commission concludes that banning
those contracts is no longer in the public
interest or sustainable in a competitive
marketplace? The best advice for both
questions is to not hold one’s breath.

The FCC has teed up a vote on the
periodic (in this case, every five years)
review of the prohibition on exclusive
contracts in its program access rules. According
to a source familiar with the item,
the review proposes two alternatives to
continuing to regulate in the space, even
with that conclusion.

The vote is scheduled for March 21,
but FCC chairman Julius Genachowski
has already circulated the item, which
means it could be voted on before then.

Not surprising to anyone who has followed the FCC’s interest
in access to regional sports networks, one option would be
to scrap the exclusivity prohibition for everything but RSNs.

Actually, even if the prohibition on exclusive contracts was
scrapped, terrestrially delivered RSNs would still likely have
to be made available. In voting to close the terrestrial exemption
from access rules, the FCC concluded that cable operators
who do not share their owned terrestrially delivered regional
sports networks with their competitors would be presumed to
be violating FCC rules against unfair acts or practices—a separate
portion of the rules that does not have a sunset provision.

The other option would essentially be a market-by-market
waiver approach, where cable operators could seek to lift the prohibition
by making a case for competition
in individual markets. That is similar to
the FCC’s approach to the ban on newspaper/
broadcast cross-ownership, where
it allows for case-by-case consideration.

The source familiar with the pending
FCC item added that cable operators
who had met with commission staffers
were not suggesting there was anything
“nuclear” in it. That is likely because
most of the access fights these days are
over RSNs, which are not covered under
the contract prohibition at issue

“The commission has to take some
care to reconcile what it wants to continue
to try to regulate with what was a clear intention of
Congress to sunset exclusive program regulation,” says Dan
Brenner, a partner at Hogan Lovells and former top attorney
at the National Cable & Telecommunications Association.

Also at least teed up for comment in the item, according
to another commission source, is how and whether program
access rules in general should apply to volume discounts
and price increases. Small cable ops have argued that their
lack of size translates to diminished access because of their
inability to get similar price breaks.

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