In a big victory for cable operators large and small, a federal court has said the FCC was within its authority to make it easier for cable video services to shed basic rate regs.
The U.S. Court of Appeals has upheld the FCC's decision—under former chairman Tom Wheeler—reversing the rebuttable presumption that cable operators are not subject to local competition, thereby making regulators prove there is a lack of competition or rate regs go away.
The onus had been on cable ops to prove their was competition, but the FCC concluded that the near-nationwide availability of DBS essentially represented that competition.
The commission, with the strong backing of cable operators—NCTA–The Internet & Television Association and American Cable Association both intervened in the court challenge on the FCC's side—last year voted to reverse the rebuttable presumption and assume cable systems faced local market competition (primarily given the ubiquity of satellite TV) unless telecom regulators or other challengers could prove they did not.
A finding of effective competition lifts basic cable price regulations.
Writing for the three-judge panel that rejected the challenge to that decision by the National Association of Broadcasters, the National Association of Telecommunications Officers and Advisors, and the Northern Dakota County Cable Communications Commission, judge Douglas Ginsburg said the FCC decision was within its authority.
"Because the Congress has not spoken directly to the question whether the Commission may use a rebuttable presumption in lieu of case-by-case findings of fact, we analyze the Commission’s decision under Chevron step two," said Ginsburg, referring to the multi-part test for courts deferring to the subject matter expertise of a regulatory agency. "Based upon the strength of its nationwide data and the opportunity it gave each franchising authority to support the opposite conclusion [virtually none did], we hold the Commission’s use of a rebuttable presumption to comply with the statutory requirement that it make a finding on the state of competition in each franchise area is a permissible construction of the statutory requirement that the Commission 'find effective competition' before terminating rate regulation."
Not surprisingly, the National Association of Telecommunications Officers and Advisors (NATOA) opposed the move and sued the FCC.
NCTA and ACA, in a brief filed in support of the FCC, said the commission's decision to make franchise authorities petition to retain that regulation was a reasonable implementation of the Communications Act, was consistent with the relevant statute and squared with current market realities, and added that to retain the previous presumption would likely have been arbitrary and capricious.
The National Association of Broadcasters backed NATOA in the suit. It argued that reversing the presumption would lead to higher prices and cable operators pulling local TV station signals off the basic tier.
“We are gratified by the Court’s unanimous decision upholding the FCC’s effective competition order," said NCTA in a statement. "This decision further affirms that consumers are enjoying the benefits of a hyper-competitive video marketplace and that consumer interests are best served by relying on competition rather than outdated regulations built for a world that no longer exists.”
"ACA is pleased with the Court's decision affirming the FCC's 2015 Order that established a presumption that cable operators now face 'effective competition' nationally,' said American Cable Association President Matt Polka. "In today's market, consumers have at least three choices for traditional pay-television service and can elect to subscribe to many online video services, like Netflix and Hulu. There is no longer any good reason that cable operators should remain subject to burdensome rate regulation. ACA is also pleased to see that broadcasters' attempts to maintain unnecessary and unwarranted regulatory handcuffs on cable operators have been thwarted."
“While I disagreed with many of the FCC’s decisions during the Tom Wheeler-era," said free market think tank Free State Foundation president Randolph May following the decision, "one of the most constructive, market-oriented actions the agency took was establishing a presumption that, on a national basis, the cable market is presumptively competitive. Of course, with competition from satellite and telephone company video providers, and increasingly mobile video services, it would have been blinking marketplace reality to have determined otherwise. Aside from the immediate impact of the court’s affirmance, the ruling ought to have a broader impact in pointing the way for the Commission to employ deregulatory evidentiary presumptions in other instances where there is effective, even if not ubiquitous, competition.”