The FCC may be inclined to let media companies bulk up, but it is still concerned about how they throw that weight around.
Last week, the FCC voted to extend the life of rules forcing cable conglomerates to sell programming to satellite-TV distributors and other competitors for at least another five years. Though the commission's decision was expected, the supporters' strong endorsement for preserving the mandate was somewhat surprising given the deregulatory leanings of the three-Republican majority. Legg Mason analyst Blair Levin said retention of the program-access rules is a harbinger of future regulation: "As media-ownership limitations begin to fall, the commission will focus increasingly on how companies act."
The program-access rules, which cover programming networks owned by cable operators, were enacted by Congress in 1992 to ensure that competitors such as satellite TV and local cable overbuilders had access to the kind of popular programs needed to attract subscribers.
Since then, cable's share of the pay-TV market has dropped from 95% to 78% and direct-broadcast satellite's has grown from scratch to roughly 18 million subs. Congress ordered the mandate to expire Oct. 5 unless the FCC could justify it.
FCC Chairman Michael Powell credited the mandate with fostering the growth of DBS but said cable operators still have sufficient market power to deny their programming to competitors without threatening the viability of their networks.
Multichannel TV "remains a phenomenally concentrated market," he said just prior to the commission's June 13 vote. "While competitive developments have been healthy, they have not reached the level at which one is confident that the opportunity to use program exclusivity as a barrier to effective competition has been completely mitigated." He noted that the most popular programming, considered most essential for winning subscribers, is still owned by top cable-system operators.
Of particular concern is growing cable-industry consolidation, which places the majority of subs and top programming in the hands of four or five operators.
Ironically, the FCC reiterated its refusal to bar cable networks from striking exclusive programming deals when programs are transmitted to cable systems via fiber-optic links rather than by satellite. The 1992 law applies only to programs transmitted to distributors by satellite, and DBS companies have complained for years that some cable systems are using the fiber "loophole" to circumvent access mandates for local sports nets in Philadelphia and New York.
Even though clustering may give cable systems more opportunity to transmit local nets by fiber, the FCC said it can't stop the practice without a change from Congress. Federal appeals judges on June 11 upheld the FCC's reading of the law.
Still, the satellite industry praised the FCC action. "This five-year extension will be of great benefit to our customers," said DirecTV President Roxanne Austin. The Satellite Broadcasting & Communications Association urged Congress to "close this loophole."
The FCC's Republican Kevin Martin and Democrat Michael Copps backed preservation of the rules. Republican Kathleen Abernathy voted against. "Increased competition in both video distribution and programming markets renders the ban no longer necessary," she said, adding that, without the mandate, cable programmers will have more incentive to develop new content.
Public advocates called the vote a sign the commissioners' relaxation of media-ownership limits is not a fait accompli. "Today's ruling gives us hope that the FCC will fairly consider the evidence," said Media Access Project, in a statement.
The cable industry pushed to kill the mandate. "We're disappointed that the FCC chose not to eliminate this regulatory relic," said Daniel Brenner, NCTA's senior VP for law and regulatory policy. The commission will revisit the rule in 2006.