Every time I read about a new dispute between two video companies like the latest between Verizon and Cablevision, I'm reminded of Woody Allen's
famous comment about the entertainment business. "It's dog eat dog," he lamented. "Actually, it's worse than dog eat dog. It's dog doesn't return dog's phone calls."
That's pretty much the video biz to a teea world of wait-out wars, brinkmanship, and extended bouts of "chicken." And the rules of engagement are mostly found in a single law:
The Cable Act. By a vote of four to one, the Federal Communications Commission
tweaked those rules this week in favor of Verizon's position that it should have access to key Cablevision HD sports channels. That doesn't mean that Verizon has won the fight yet, but now the telco has a much better chance when the agency considers its case.
One thing is for sure, this decision is good news for consumers. Here's how the FCC came to it.
We want the HD, too
In July of 2009 Verizon filed a
program access complaint with the FCC charging that Cablevision "continuously has denied" Verizon access under any terms to the HD versions of its regional sports programming in the New York, New Jersey, and Connecticut area. We're talking big team stuff here, including the New York Knicks and New York Rangers (not to mention the New Jersey Devils).
Verizon was able to negotiate SD video editions, but of course any service would want to offer HD as well. At the same time, Verizon charged, Cablevision has been "trumpeting" that the company "is the only HD source for four of the nine professional sports teams in the New York City metro area."
No fair, the telco cried. The Commission should come to the rescue under Section 628 of the Communications Act, as amended by the Cable Act, section (b) of which declares it unlawful for a cable or satellite cable operator to engage in "unfair methods of competition" that prevent another multichannel video program distributor (MVPD) from offering "satellite cable programming or satellite broadcast programming."
Indeed, when Congress passed that law in 1992, it made its intentions and concerns for the legislation obvious. "The cable industry has become highly concentrated," the bill stated. "The potential effects of such concentration are barriers to entry for new programmers and a reduction in the number of media voices available to consumers."
What could further that concentration more than allowing regional cable franchise owners to hoard "must have" sports team programming that millions of viewers, well, must have?
Now you might think that this language would be a no-brainer, and that nobody would even bother with these kind of shenanigans ever again, given the Cable Act's clear message. But think again, because the words "satellite cable" and "satellite broadcast" created a huge loophole for incumbents to ignore the carriage-sharing requests of MVPDs like Verizon, which offer video via fiber optic lines.
In fact, among cable combatants, this omission famously became known as the "terrestrial loophole."
But as of Wednesday, it will hopefully loop no more.
A subset of practices
So how does the FCC get FIOS into this legal picture? Before we go there, some of you Ars readers might be having a little deja vu feeling about now. Didn't the Commission just try some fancy dancing of this sort, you might be wondering, with its Order sanctioning Comcast for P2P blocking,
arguing, with not much success in court, that the agency's authority rested on "ancillary" powers given to it by various policy statements in the Communications Act?
Yes, but the difference here is that there's clearer Congressional intent in the Cable Act, and it's from that intent that the agency has been building its rules for several years. In addition, the very court that gave the FCC hell this month on its Comcast move has been far more friendly to the Commission in this area.
Some history is in order here: On the last day of October 2007, the FCC gave consumers an early holiday gift by
banning exclusive cable deals in multiple dwelling units (MDUs), otherwise known as apartment buildings. Restricting a building's access to one cable provider foreclosed the expansion of fiber and "triple play" (phone, video, Internet) services in many areas, the Commission observed.
"Exclusivity clauses deny MDU residents the benefits of increased competition, including lower prices and the availability of more channels with more diverse content." About four months after its decision on MDUs, the agency
extended the exclusivity ban to ISPs as well.
To back this decision, the FCC invoked our friend, Section 628. Not surprisingly, the National Cable and Telecommunications Association quickly sued the FCC in the District of Columbia Circuit Court of Appeals. Its lawyers argued that when Congress wrote 628, it was not worried about barriers to expanded service choice, but instead about practices that prevented consumers from getting certain kinds of programming. The legal arena of conflict on lawmakers' minds was the endless battle between content providers and cable companies, NCTA contended, not roadblocks to service in general.
The DC Court
brushed this argument aside in a few pages, noting that nothing in the literal text of 628 prevented the FCC from making its ruling. And although NCTA pointed to "considerable evidence that Congress was specifically concerned with unfair dealing over programming," the judges explained, "they offer no evidence from the legislative record to show that Congress chose its language so as to limit the Commission solely to that particular abuse of market power."
Well, if Congress didn't limit its language to exclude apartment dwellers, the FCC is arguing now, it didn't limit it to exclude fiber video providers, either.
"The fact that Congress singled out a subset of practices with which it was particularly concerned," its Order contends, "and required the Commission to focus on those practices expeditiously does not limit the broader rulemaking authority expressly granted to the Commission... Here, we find that unfair acts involving cable-affiliated programming, regardless of whether that programming is satellite-delivered or terrestrially delivered, pose the danger of significantly hindering MVPDs."
Small moves
But, the Commission warns, it is going to move cautiously in this area, making calls not via a general rule, but on a case-by-case basis.
"Cable operators have an incentive and ability to engage in unfair acts involving their affiliated programming," the FCC notes, but that doesn't mean that that is their intent every time. It will still be the job of petitioners to demonstrate bad intent. In addition, the agency is making it clear that it's particularly concerned about the hoarding of "non-replicable" fare, such as HD regional sports network (RSN) programming.
"If particular programming is replicable, our policies should encourage MVPDs or others to create competing programming, rather than relying on the efforts of others, thereby encouraging investment and innovation in programming and adding to the diversity of programming in the marketplace," the FCC says.
That last sentence could be music to the ears of Time Warner Cable, which is understandably protective of its very locally oriented cable channels. These include NY1 News, News 14 Carolina, News 8 Austin, SportsNet for Rochester and Buffalo, New York, and OC16 in Hawaii. Earlier this month, Time Warner, anticipating Wednesday's move, met with the FCC
to argue that it would be unfair to require TWC to share those channels with other services.
TWC's prose may have reflected some bitterness inherited from its
recent subscription fee war with a slew of Fox-affiliated TV stations.
We explained that Time Warner Cable has invested many millions of dollars to launch and support these local programming services, at a time when broadcasters are shuttering local news operations and retreating from their commitment to localism. Time Warner Cables investments advance the core public interest goals of competition, localism, and diversity, and the Commission should not take any action that impedes such beneficial undertakings. Indeed, as the Commission is contemplating ways to bolster the effectiveness of its media ownership rules in response to broadcast stations various efforts to combine local news operations in ways that harm the public interest, it would make no sense to create a regime that could result in compelled sharing of local news operations.
So the FCC has clearly set up Section 628 in a way that expands its pro-consumer potential, but with a flexibility that will allow it to reward cable companies for boosting journalism and local content.
Not everybody is convinced that this is the right way to go. Although the FCC's Order
won over the agency's newest Republican, Meredith Attwell Baker, with its narrow, case-by-case focus, senior Republican Robert M. McDowell
dissented from the move. He's still not convinced that the Commission has the statutory authority here, even with the DC Circuit court's blessing in the MDU case.
Verizon, of course, is tickled pink by the decision. "This is a big-time victory for television sports fans," declared Kathleen Grillo, Verizon senior vice president of Federal Regulatory Affairs, shortly after the announcement. "This ruling means that consumers will no longer have to stick with their incumbent cable provider in order to watch local teams in high definition."
We'll see.
PEACE.
