Cable

cable, franchising, related issues

Will The DC Circuit Pull The Plug On Program Access?

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Next week, the D.C. Circuit will hear oral argument on the FCC’s 2007 decision to extended the program access rules another five years. What surprises me is how few people seem to have considered the possibility that the D.C. Circuit will reverse this decision and vacate the rule, as they did last month with the 30% cable horizontal ownership limit.

Part of that is the way people tend to make analysis based on conventional wisdom. “Everyone knows” that without the program access rules, competitive providers would be toast because the largest cable incumbents can control programming, just as “everyone knows” that we don’t need a 30% cable ownership limit because the MVPD market is so wildly competitive that the largest cable incumbents can not possibly influence cable programming. As Comcast and Cablevision pointed out to the DC Circuit, however, the conventional wisdom in this regard is not entirely consistent. If, as the court found last month as a matter of law, the MVPD market is wildly competitive and consumers switch willy-nilly from one to the other rendering it impossible for a cable provider to block a rival programming network from emerging, how on Earth can cable programmers below the 30% limit exercise foreclosure?

There are, of course, sound answers to that in both law and economics, although the biggest single deciding factor is likely to be the absence from the panel of Douglas Ginsburg, a man who believes membership in the Federalist Society substitutes for an actual understanding of economics and has published an academic article yearning for the “good old days” when the courts made economic regulation unconstitutional and concluding that courts should not defer to agency efforts to create “synthetic competition.” (An offense in the eyes of the Gods of the Marketplace.) I believe the panel is Sentelle, Griffith and Kavanaugh, which is not exactly good news for the program access rules but isn’t death on wheels like Ginsburg (or Williams or Edwards). Sentelle and Griffith, who were both on the imaginary competition outweighs real competition decision back in June overturning the FCC’s decision not to grant Verizon a forbearance petition, and Kavanaugh, who was on the cable ownership panel and therefore presumably agrees that switching costs aren’t real and cable operators are in such fear of youtube clips they would never make programming decisions based on affiliation. On the flip side, Kavanaugh actually wrote the somewhat more deferential special access opinion from July. Unfortunately for those who rely on program access, none of the judges who affirmed the Inside Wiring Order are on this panel.

Of course, there is something to be said for actual law and analysis of the underlying FCC Order, even in the D.C. Circuit. So below, I shall provide a brief outline of the program access rules, how we end up in court, the likely arguments, and what happens if the D.C. Cir. overturns the rules (which even I give a low probability to, but do not discount — especially given the panel) — including why that might actually be the best thing to happen to cable regulation in the long run.

More below . . .

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Comcast Channel Shifts — Looking for info.

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I’m getting email about Comcast migrating MSNBC and CNN out of its expanded tier to a higher priced tier while keeping Fox News on expanded tier in a number of markets. If this is actually going on, I’m mightily curious.

Such shifts do not happen casually. They are generally the product of fairly intense negotiations among cable operators and programmers. They also require advance notice to viewers. This makes me extremely reluctant to impute a political motive here. If NBC and Time Warner (the owners of MSNBC and CNN respectively) were being screwed against their will over a political agenda, I would have expected to hear it in DC. What mainstream coverage there is of this suggests it is part of Comcast’s general digital upgrade. So we should expect to see all remaining channels migrated off to the higher priced tier eventually. While that will constitute a significant rate increase, it will put everyone back on equal footing. Besides, as the DC Circuit instructed us all last month, cable operators have no market power and cannot influence the programming market, whatever your personal experience to the contrary may be.

So if anyone has more info on this and would like to either comment below or talk to me, I’d love to hear about it.

I suppose I should add that unless Comcast failed to give proper notice to subscribers before changing their channel line up, their is nothing the FCC can do about it, so don’t bother complaining.

Stay tuned . . .

Fragmentation Games: Playstation Gets “Boxeed,” TV Anywhere Gets More Content.

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In the latest twist in the broadband fragmentation games driven the overlap of MVPDs and broadband access providers, users of PlayStation 3 can no longer access Hulu. As some may recall, Hulu tried a similar trick with Boxee.tv, resulting in a good old fashioned tech arms race wherein Boxee camouflaged itself as browser and Hulu responded by encrypting html.

Now Hulu has shut off the spigot to Playstation 3. Why? As I noted when Hulu pulled this on Boxee in the spring, the people who make money off the existing video subscription model (both the cable operators like Comcast and the content holders like NBC Universal) really dislike the thought of streaming media actually competing with them. As long as video stayed on the laptop and occasionally stopped to buffer, it didn’t really threaten the established business models. But make it possible to watch streaming media on your regular TV, with a quality practically equal to what you get on cable, and it becomes a very disruptive technology.

Playstation 3 and other game consoles are obvious candidates to disrupt the existing business model. They already plug into your television set, you are very familiar with the controls, and the manufacturers are always expanding the capabilities of the units to make them more “media centers” and less “game centers.” Like Boxee, they represent a real threat by making it possible for me to stream online content effortlessly on my TV and watch in exactly the same way I watch anything else.

Meanwhile, Time Warner and Comcast have found lots of other content networks eager to join the “Entitlement Program.” This initiative appears to be gathering critical mass very rapidly, which is not too surprising. While some of the bigger folks like Disney may hold out to see how they can maximize their return, the midsized players anxious about possible changes to the business model are likely to want to get in while the getting is good.

To conclude, what we have here is not anything obvious or dramatic. It is a few more ripples in the pond, indicating where the big fish swim. Any one of the “fragmentation games” incidents I’ve discussed, for example the ESPN360.com business which has been slowly ratcheting up to include more ISPs, is not necessarily significant on its own. Taken together, however, I see a pattern emerging that tells me where the fun and games will happen over the next few years. Heck, at this point, I’m not even sure what policy prescription I would offer. I just know that I’m seeing a bunch of ripples that might be nothing. Or it might be bunch of salmon and a great place to cast a line. Or it might be a school of piranha and I need to be very careful before wading in.

Stay tuned . . . .

D.C. Circuit Affirms Inside Wiring In Fairly Broad Opinion. Terrestrial Loophole Next? And What About Time Warner's TV Anywhere?

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While folks in the suburbs sometimes forget this, a lot of people live in what we call “multiple dwelling units” (MDUs) — which is a fancy way to say things like apartment buildings and condos. One of the problems for people trying to switch from one provider to another for cable (for example, from Comcast to RCN) is that a cable operator may already have an exclusive deal with the landlord to provide cable services to everyone in the building. Competitors asked the FCC to ban such practices. In 2003, under Michael Powell, the FCC refused to ban such exclusive deals because “regulation is always bad, mmmmkayyy.” In 2007, as part of Kevin Martin’s attack on cable market power evil vendetta against the helpless cable industry, the FCC reversed this determination and found that under Section 628(b) of the Communications Act (47 U.S.C. 548) it needed to prohibit cable operators from entering into or enforcing such exclusive deals because Verizon can’t sell FIOS w/out being able to offer triple play. Predictably, this was widely denounced by the cable companies and their cheerleaders as not merely unwarranted, but a violation of law and certain to be overturned on appeal.

Turns out, not so much. In fact, in a rather broadly worded opinion, the D.C. Circuit affirmed the 2007 Order. Indeed, the language affirming the decision opens the door to the FCC tackling other cable issues, such as the terrestrial loophole (which Verizon wasted no time in pointing out to the FCC). Mind you, it remains unclear at this point whether the new FCC will have any interest in cable market power or not.

Still, there are a number of important aspects about this case, especially its implications for the FCC to regulate Time Warner’s TV Anywhere strategy, aka “how cable operators plan to preserve their existing business model and fight off Netflix.” I discuss this in more detail below . . . .

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The Fragmentation Games Continue: Cable Has a Plan So Cunning Even THEY Can't Figure It Out.

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So back in September ’08, when ESPN.com cut a deal with Verizon and AT&T to lock out subscribers to rival ISPs, I predicted the cable guys would try to lock up content of their own. and, indeed, the cable guys have proven uniquely ambitious. As reported at DSL Reports and elsewhere, the cable guys want to lock in all cable network programming. But subsequent reports, and a lack of object from competitors like DIRECTV, make it look more like a cable programming network play and less like an incumbent cable ISP play.

One way or another, I expect this to keep getting interesting over time.

More below . . .

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Comcast Celebrates Martin's Departure By Pulling Leased Access Channel.

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I just got an email from the folks at Family-Life TV, a leased access channel on a bunch of Comcast systems in Pennsylvania, that Comcast just decided to drop their programming. Comcast claims Family-Life TV is in arears and owes 3 months worth of payments. David Croyle, who runs Family Life TV, tells me he has canceled checks to show he paid.

All I can say is “wow, that sure didn’t take long.” I wonder what other celebrations the cable boys have planned. Roasting a PEG programmer on a spit? Killing PEG in Los Angeles? Or perhaps just the ever popular “rate increase because we feel like it.”

I remain hopeful that the cable reform agenda will not die with Martin’s departure. At the least, it would be nice to see that the FCC will entertain complaints from leased access programmers when they get kicked off the air. Hopefully, it will take less than 3 years to resolve the complaint.

Stay tuned . . . .

MLB Network Pays To Play To Get On Cable — Dumb NFL Stupidly Relies on FCC To Enforce Federal Law. Suckers.

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On New Year’s Day, Major League Baseball launched its new cable network. Unlike the NFL Network, which has fought numerous battles with Comcast and Time Warner to try to get carriage, the MLB Network will debut in 50 million homes.

Gee, I wonder if it has anything to do with MLB giving Comcast, DIRECTV (now run by the guy who engineered this strategy, John Malone), and a bunch of other big cable boys an equity share?

Oh if only we had a federal law to prevent such extortionist use of market power, and a federal agency to enforce it! Oh wait, we do. Well why hasn’t the NFL filed a complaint? Oh wait, they did. Well then, why do Comcast, DIRECTV, and the rest of the cable cartel think they can get away with it? Oh right, because the FCC has done absolutely jack on this. Why? Because, as we all know, everything is perfectly wonderful and competitive in cable-land and trying to address the NFL’s complaint is just all part of Evil Kevin Martin’s wicked vendetta against this customer-oriented highly-competitive industry.

A bit more below . . . .

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Update: Cable Cos Respond, FCC Reviewing.

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To update on the question of whether cable companies think they are above the law. According to this piece by Ted Hearn in Multichannel News, all 13 cable cos responded to the FCC’s letter of inquiries (LOIs) issued in response to the consumer complaints. The FCC is apparently now reviewing the adequacy of the response.

Mind you, according to the article, we are still likely to find that the cable cos responded in a less than thorough way, and will necessitate the FCC coming back with another request. But this is merely the usual fun and games by which large companies avoid obeying the law, rather than an outright statement of defiance that the law simply doesn’t apply to them.

I suspect the cable cos will do their best to run out the clock, in the hopes that the next FCC will be more tolerant of their exercise of market power. Whether that is true or not (and it will certainly NOT be true if either Adelstein or Copps is chair), I would hope that all the FCC Commissioners, but especially the two Democrats, back Martin on this investigation and make it clear to the cable cos they will not tolerate any efforts to run out the clock.

As President-elect Obama observed at his first press conference: “The United States only has one President at a time.” Similarly, the FCC has only one Chairman at a time. Certainly when it comes to investigating consumer complaints, all FCC Commissioners need to stand united in making it clear to industry that a time of transition is not a time when you can get away with screwing consumers.

Stay tuned . . .

Cable Industry Flips Off FCC, Fines To Follow? Expect Other Industries to Tell FCC To [Fleeting Expletive] Off Too.

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I clearly missed a class in law school. Not once in my Administrative Law class did my professor ever tell me that you could respond to a federal investigation by telling the agency “We know you have authority, but we’d rather not answer these questions because you are a great big meany.” But then, I’m not working for the cable industry, which has repeatedly shown it has trouble with the concept that federal law really applies to them and that the FCC is supposed to be a regulator not a lap dog.

Today’s episode of “I Can’t Believe The Chutzpah” comes from the ongoing investigation by the FCC over whether cable operators are using the confusion around the DTV conversion to push users into buying digital tier service, and rent new digital set-top boxes in violation of the rules on set-top box interoperability, or just generally violating the law by changing channel line ups without notice to either subscribers or local franchise authorities, migrating stuff off basic tier without warning, or charging for additional tiers to get channels required by law to be available on the basic tier. Mind, I’d also like them to explicitly ask whether the cable guys are unfairly migrating unaffiliated channels to digital in violation of Section 616, but that’s just me.

Anyway, after getting a bunch of consumer complaints and reading Consumers Union’s letter to Congress (or at least hearing about it on NPR), the FCC sent out a bunch of letters of inquiry to the named cable companies and Verizon asking them to provide a boatload of information which would allow the FCC to determine if the consumer complaints were, ya know, true. Given that this is lots of people being potentially ripped off big time, the agency told the everyone that got a letter they had two weeks to reply.

Mind you, this is hardly an original process or unique to the cable industry. I should know. The FCC did the same thing in response to my complaint about the wireless microphone guys back in August. The FCC (also under Martin I should add) acted with similar swiftness and intensity back in 2006, when Verizon and BellSouth tried to keep charging USF fees on DSL after they were phased out. The phone companies, apparently under the same misconception that I was that even if you are a big company you actually have to obey the law, backed off. The cable companies have other ideas. And, if they get away with it, I’m sure the Bells, broadcasters, and every one else will follow suit.

So yesterday, NCTA,the trade industry for the cable guys, sent a lengthy letter to the FCC explaining that the FCC is not allowed to investigate the cable industry. They recommend that the FCC rescind the letters of investigation and, instead of having the Enforcement Bureau actually act on consumer complaints, the FCC should hold a nice, quiet Notice of Inquiry instead. Then, if Martin gets all the other Commissioners to agree, and the FCC asks nicely and without any legal compulsion to answer honestly or completely, cable operators might consider responding.

Now I just know, KNOW that there are people out there who hate Kevin Martin so much that they will decide that it is really O.K. for cable to tell the FCC to “fleeting expletive off and die,” because it is the poor helpless widdle cable guys and the evil Kevin Martin (I cannot help but observe that Verizon does not seem to have any problems complying with this request, but of course they are an evil minion of Kevin Martin, or the other way around. Besides, Kevin Martin hates the cable industry, so there!)

As what is often called a “consumer advocate,” I’m a little alarmed that we will now have a new doctrine that says “consumers can complain, but the FCC can’t protect them if we think the FCC Chair might enjoy it.” And while I would flippin’ think that the idea that the cable companies need to obey the law like everyone else would be bloody self-evident, not to mention that the consequences of letting industry dictate to the federal watchdog agency what it will and won’t respect on enforcement go well beyond the poor picked on widdle cable guys to whatever industry you don’t like (in my case, wireless microphone manufacturers — I can hardly wait for Shure to refuse to cooperate with the FCC next), I long ago learned that even bloody obvious things need explaining when it comes to the cable industry and their rabid defenders.

So I address the actual legal issues below . . . .

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Why Did AT&T Get Left Off The Cable Investigation List — A Very Boring Answer.

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While killing time waiting for the Nov 4 meeting to start FCC Chair Kevin Martin discussed the recently opened investigation into cable pricing. To the surprise of those who conceive of Martin as simply having a “vendetta” against cable, the list of companies getting notices about the investigation included Verizon. OTOH, it did not include AT&T. Needless to say, the “Martin can do no good because he is EEEEVVVVVIIIIIIIIIIILLLLLL!!!!!!!!!!!” crowd hit on this as proof that Martin is merely doing the bidding of his telco masters (Verizon having been added to the investigation merely for protective coloring).

Well, I’ve given my views on Kevin Martin repeatedly. As I have said time and again, I may disagree with him a lot, but I don’t think he is an industry shill. He does what he thinks is right and the devil with the consequences. While this has its disadvantages, notably his managing to piss off the other four Commissioners and thus secure for himself a series of policy set backs and rack up a record of number of votes actually lost by the Chairman, it does mean I tend to look for an explanation that goes beyond “Martin is a bastard 24/7 and therefore this is part of an evil plot.”

Here, I think the non-AT&T conspiracy theory answer is fairly straightforward. It has to do with the particular practice the FCC is investigating — forcing customers to migrate to digital. As AT&T does not seem to be behaving in the same way as the named cable operators that got letters from the Enforcement Bureau, they are not being investigated.

OTOH, even if the FCC does find evidence of deceptive advertising practices or anticompetitive conduct, it may lack authority to act.

Thoughts below . . . .

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