Adelphia Decided

I was off at my cardiologist getting a stress test, so I missed this. Happily, I had crammed the night before and passed with flying colors! Because today’s FCC meeting was, from all descriptions, totally surreal — including a shout out to yr hmbl obdnt blogger!

Short substance review: The FCC did not adopt a network neutrality condition, they did not adopt a condition on PBS Sprout, allowing Comcast to get by with a voluntary commitment to make the programming available on a non-exclusive basis for the next three years. They acted on the Washington Nationals, and gave a nod to leased access.

More details, and further implications, below . . .

The FCC meeting started at 2:30 pm, which was odd in itself, because it should have started at 9:30 am. Last minute negotiations over Adelphia held things up — which admittedly made me hopeful to the end (I suppose I can’t do this job without a fair degree of optimism). Martin bought pizza for the waiting crowd for lunch on his personal credit card. (Is he smooth or what?)

CONDITIONS IMPOSED

So when they finally convened, they announced the Adelphia conditions (after two other items). The conditions last 6 years. You can read the FCC fact sheet here, although it is hard to get a real sense until the Order is published. (The official order isn’t out yet, but probably will be soon after they include the last minute negotiations.) To compare against my list from yesterday:

RSN: They kept the Philly carve out and the affiliation requirement. Eagles, Sixers, and Phillies fans — sucks to be you!

With regard to the condition, Commissioner Adelstien won two modest enlargements from the original draft. First, although the order applies to “affiliated” RSNs, the language of the order will apparently apply to RSN’s where Comcast and TW have an option to buy a chunk or have a mangement interest. This is usually referred to as “attributable interests” in commission parlance. Because interests like these give an entity the ability to influence decision making, without having an ownership interest on paper, the FCC “attributes” the interest as if it were ownership. Apparently, the FCC will launch an NPRM on attributable interests in programming networks in the near future as a result of the merger.

PBS Kids/Sprout: No condition, but the trade press and Commissioner Tate’s statement report that Comcast has agreed to make the programming available on competitive terms to other distributors for the next three years as a way of avoiding conditions. I hate this unenforceable stuff, but the FCC always seem to go for it. If the company is willing to do it, why not get it in writing enforceably? Feh.

Network Neutrality: Sadly, Callahan was right on this one. But I still held out hope to the end. This does not bode well for the AT&T/BellSouth merger, although one can make various distinctions between the the mergers and the types of service.

Why the NN setback? Again, it was always unclear what would happen in a 3-2 Commission and whether McDowell would push Martin on this one. Also, as I observed yesterday, the utter failure of any industry folks to show up and lobby hard for this made it a tough sell to the Republicans.

Nationals Carriage: Washington will not suck as much as Philly, apparently. Commissioner McDowell, joined by Commissioner Adelstien, insisted the FCC do something. The FCC required a two-stage commercial arbitration. First, an arbitrator will determine if Comcast’s refusal to carry MASN (the network that has the rights to the Nationals) was legitimate or an illegal exercise of market power. If the later, the companies will then set forth proposed carriage terms, with the arbitrator selecting which set of terms to adopt.

In other words, the FCC just said “our enforcement staff is so hopeless we’ve decided to outsource a core law enforcement function of ours to the private sector.”

The America Channel: No apparent direct relief, but see below on leased access and the various commissioner statements. Also, there may be something in the final order.

Leased access: Surprisingly, this drew some interest and a condition. The FCC did not do anything about the rate setting formula (which still sucks), but allowed anyone seeking leased access on the Comcast or Time Warner systems to go to commercial arbitration rather than use the FCC complaint process. The Commissioners also expressed interest in reexamining leased access and pursuing this in a general rulemaking proceeding.

I’ll go on in a moment, but first, I need to summarize the message to FCC staff charged with enforcing various aspects of the 1992 Cable Act that protect independents and subscribers from the market power of cable incumbents.

*Ahem* Helllloooooo!!!! FCC enforcement staaaaafffff!!!!!!! Are you listening? The Commissioners are reduced to outsourcing enforcement because, how do I put this politely, YOU SUCK! FCC ENFORCEMENT HAS BECOME A FREAKIN’ JOKE IN THE INDUSTRY! NO ONE TRUSTS YOU TO DO YOUR JOB!

This is sad because I know a lot of good people at the FCC who work really hard and try to do what is right. And, on a lot of things, staff does a good job. Heck, they were awesome during Katrina and Rita while the rest of the Federal government sat around looking like stunned bunnies in front of an 18-wheeler. But the plain fact is that when you say to folks “you can take a complaint to the FCC,” the reaction is: “Ha ha ha. I can also flap my arms and try to fly to the Moon.” And most people give better odds on reaching the Moon before the FCC resolves their complaint favorably.

Returning to what the Commission actually said, we come to the end of the good news. As expected, the Commission opted to reject any conditions to protect PEG, promote competition via unbundling, or reign in cable control with regard to political advertising or blocking competing advertising. Bummer.

The final vote was 4-1. the Ds split, with Commissioner Adelstien concurring in part and dissenting on the refusal to impose NN, but Copps dissenting from grant of the merger at all. This is one of those cases where it is a tough political call. Adelstien was able to make headway on issues he cared about as the price of concurring in a merger he didn’t like (and, he appears to believe that asking Adelphia subscribers to wait while someone else bought the systems was too much to ask). Copps decided he couldn’t go along with it at all. I can’t fault Adelstien for concurring to get concessions (particularly as one of the issues he championed was leased access, that I really care about), nor can I say Copps should have gone along.

COMMISSIONER STATEMENTS

The seperate statements are worth a read, both as shedding light on the priorities of various commissioners and as tea leaves to upcomming proceedings.

On the Republican side, Chariman Martin’s statement was short and sweet. He acknowledged that the merger raised issues, and thanked the majority for working together for conditions to address what Martin felt was the primary competitive harm — access to regional sports programming. His statement on NN is worth quoting in full:

“In the end there was still some disagreement on net neutrality. This should not be a surprise, as there is not consensus on net neutrality within the industry or among policy experts. I continue to support the principles we adopted last summer. However, I do not think requirements are necessary at this time without evidence of actual harm to consumers or internet users. The Commission has, and will continue to, monitor the situation and will not hesitate to take action to protect consumers when necessary.”

As I have said before, Martin plays a careful game of political hardball. Note the nuances. None of the bombastic “solution in search of a problem” crap we get from industry or got from his predecessor, Michael Powell. Rather, he has the ever so reasonable “we have principles, we will vigorously enforce them if we see a need.” No doubt through that enforcement process that has worked so well for carriage complaints and leased access.

Commissioner Tate’s statement fell back on the standard argument that the FCC shouldn’t resolve industry problems in the context of a merger. While acknowledging the importance of diversity of voices and the “troubling” reports that Comcast and Time Warner are “difficult to work with on this issue,” she did not want to use the merger to address these concerns. “I am not willing to combate allegations of unfairness with an unfair act of our own,” she said. Accordingly, she was pleased that the order did not attempt to address “industry-wide problems on a case-by-case basis.”

Tate also displayed her stated preference for, in her words, “regulatory humility and resist[ing] the temptation to burden the market with rules and regulations that would stiffle innovation and growth.” In this regard, Tate went on to list the various promises the Applicants made which, while not enforceable conditions (given her view that enforceable conditions are bad for some reason), she “intend[ed] to see that promises made are promises kept”:
1) No redlining;
2) Comcast will make PBS Sprout VoD content available through other VoD distributors.

She also called on parties to use established Commission processes (she lists them) to address their complaints. She also called on the FCC to “reenergize the cable ownership discussion at the FCC,” which I wil assume is a polite way of saying the FCC needs to finally resolve the pending cable ownership proceeding and set a real limit.

Finally, she felt compelled to point out that Comcast, Time Warner, and the rest of the cable robber barons are “good corporate citizens” and their “charitable endeavors have made a difference to thousands of lives.” Yup. And J.P. Morgan, Andrew Carnegie and the other corporate magnets of a previous century likewise gave millions to charitable foundations and built libraries, universities, etc.

As I’ve said before, maybe it’s just me, but I’d rather be a free citizen in charge of my own destiny than relying on the charity of large corporations whose market power give them control of key industries. I suppose the free market patricians who want to see “good corporate citizens” are nicer folks than the libertarian Scrooges who think even this much deviation from the free market is wrong and “creates dependencies.” But I’d rather companies not have market power at all, thanks.

Commissioner McDowell used his concurring statement to blast the FCC enforcement staff for failure to adequately enforce existing laws, lamenting that “an indolent bureaucracy’s failure to obey simple Congressional mandates” damages competitors and consumers alike. He applauded “a commitment by the Commission to review and reform the procedures for enforcement of its program access and program carriage rules.” Apparently, the Commission will do this “in short order.” He also said the order will impose a “shot clock” under which the FCC must resolve complaints. He added a Republican trope that private resolution of disputes via arbitration would no doubt provide an efficient, market-tested alternative to the above mentioned indolent bureaucracy.

On the Democratic side:
Commissioner Copps dissented. Copps stressed the market power the merger gives Comcast and Time Warner, and that while the majority recognizes the potential harms, it does not significantly address them. As a result, the merger means fewer competitive choices, higher prices and fewer independent media voices. Copps praised McDowell for championing MASN, praised Adelstien for championing leased access, and chastised the Commission for the Philly carve out on RSNs.

Copps also took the Commission to task for failure to adopt a network neutrality condition. In addition to observing that the Commission had imposed such a condition in the Bell mergers and that this therefore represented a “step backwards,” Copps raised the need for a “fifth principle” that directly addressed the tiering/discrimination question:

“I believe the Commission needs to consider the addition of a fifth principle to its Internet Policy Statement. We are entering a world where big and concentrated broadband providers are searching for new business models and sometimes even suggesting that web sites may have to pay additional charges and new tolls for the traffic they generate. This could change the character of the Internet as we know it. To keep our policies current, we need to go beyond the original four principles and commit industry and the FCC to a specific principle of enforceable non-discrimination, one that allows for reasonable network management but makes clear that broadband network providers will not be allowed to shackle the promise of the Internet in its adolescence.”

Personally, I’m pleased to see Copps raise the profile on this at the FCC, even if he proved unsuccesful in getting such a condition.

Commisioner Adelstien concurred generally but dissented from the failure to adopt a network neutrality principle. In the dissent from the failure to adopt such a condition, Adelstien endorsed Copps call for a “fifth principle” to prohibit discrimination or tiering.

While sharing the concerns of merger opponents, Adelstien placed great weight on resolving the Adelphia bankruptcy and getting “needed upgrades” to Adelphia’s five million subscribers. He joined Tate and Copps in expressing disatisfaction that the Commission has not resolved the cable ownership proceeding (now pending for over five years) and set a limit on cable size in the rule. He praised McDowell for his work on MASN and Tate for her work on PBS Sprout.

Adelstien also spoke about leased access, thanking the Chairman for agreeing to launch a new proceeding in three months and to move that to a final order on leased access soon thereafter. In a surprise move to me, Adelstien gave me a personal shout out on this.

“I would also thank Harold Feld and the Media Access Project for their leadership in bringing this to the attention of the Commission, and for making a real difference in the final product.”

What can I say? I’m grateful for the recognition. God knows we usually never know if we make a difference. I can say that Tate’s comments on the unique value of PBS programming and concern for “Hispanic oriented programming” being denied carriage in LA by Comcast , and that McDowell’s comments on why people rarely file complaints echo my own. But lots of other folks said the same thing. Getting a personal shout out is a pretty rare recognition and I appreciate it.

FUTURE IMPLICATIONS
On the down side, Time Warner and Comcast got their merger, and Comcast keeps its stranglehold on Philly sports. Diversity of programming and cable competition take another blow, and network neutrality takes a step backward at the FCC.

On the up side, it appears the charmed life cable has led until now at the FCC may be over. Even among the Republicans, Comcast and Time Warner did not have any major defenders claiming problems don’t exist or that the market will automatically solve them. And, I can hope, FCC enforcement staff will want to show that they can be the consumer’s watchdog rather than cable’s lap dog after the significant tongue lashing they got in the Order and concurring statements.

I’m hopeful that we may see real action on leased access, and that independent programmers try to take advanatge of it. Of course, there’s a first step of getting independents to know leased access is out there as a carriage possibility, and that it is worth paying for. One of the problems with FCC remedies is that unless you follow this stuff closely, you don’t even know they exist.

Finally, with three Commissioners pressing for resolution of the cable ownership limit, I would love to see that concluded (preferrably by setting the limit where we’ve suggested, at 25%, but since this would require divestitures — which the FCC and Congress hate to order — I would settle for 30%, the national limit Comcast has now). From a legal perspective, the recognition by the Commission in this order that regional concentration matters in cable is a huge step forward. If the Commission ever changes back to majority Democrat (which requires election of a Democrat as President, so we’ll see), stuff in this order lays the groundwork for effective rulemaking in the future.

Yeah, but did we win?
So, all things considered, do I count this as a win? In the end, I have to wait for the final order to come out to know the full impact. We got a lot of stuff out of an order that could easily have been a catastrophe, even if we lost a skirmish in the Net Neutrality war and the media consolidation fight generally. So do I measure by what was reasonable to achieve in a 3-2 Republican administration, in which case this is a pretty amazing success? Or do I measure by the fact that, at the end of the day, Comcast and Time Warner got their merger through?

As a long time Red Sox fan, allow me to offer a possible analogy. Red Sox fans consider it a bad season if the Sox don’t make the playoffs. It’s a good season if they make it to the play offs, a great season if they win the play offs (especially if they beat the Yankees along the way), and a once in a life time day of holy celebration if they win the World Series.

On the “Red Sox” scale, I place this somewhere between making the playoffs by beating the Yankess and actually winning the playoffs. If we’d gotten Network Neutrality as well, I’d have bumped it up to winning the playoffs.

Stay tuned . . .