FURCHTGOTT-ROTH URGES DELAY IN AT&T CABLE DIVESTITURE
In light of Appeals Court ruling on cable ownership limits, FCC ought to suspend deadline for AT&T to divest cable interests until agency decides how to respond to court, FCC Comr. Furchtgott-Roth said Fri. Action by U.S. Appeals Court, D.C., (CD March 5 p1) has left agency without 30% cable ownership cap, making it hard to force AT&T to comply with it, he told reporters at breakfast briefing. “It’s impossible to compel a company to come into compliance with rules the court said are unconstitutional,” he said. Court decision, Furchtgott-Roth said, “places in substantial doubt what happens to the AT&T merger conditions.”
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FCC Chmn. Powell said in USTA conference speech Wed. that court decision could lead to reconsideration of Commission’s requirement that AT&T shed its 25.5% holding in Time Warner Entertainment (TWE), its stakes in Liberty Media and other programming interests or cable systems with 9.7 million subscribers to get under agency’s 30% ownership limit. Court action “implicates our thinking,” Powell told audience, requiring FCC to review “what our legal obligations are” on AT&T matter. He said he didn’t know what conclusion agency might reach.
Spokesman for AT&T, which controls 42% of pay-TV market following its acquisition of MediaOne, declined comment on Furchtgott-Roth’s comment. Company, which has been pursuing both sale of its TWE stake and spinoff of Liberty Media programming unit to satisfy FCC divestiture order, faces May 19 deadline for complying with order and more imminent March 20 deadline for telling Commission whether it will be able to comply. Spokeswoman for FCC Cable Bureau, which reviewed AT&T-MediaOne merger, also declined comment. Aides to Powell and Comrs. Ness and Tristani hadn’t returned calls by our deadline Fri.
Furchtgott-Roth said he suspected AT&T divestiture was under review by Powell’s office, other commissioners, Office of Gen. Counsel and Cable Bureau, but there was some dispute whether court’s action applied to conditions placed on license transfers. “I think it’s fair to say that reasonable people disagree,” he said. FCC placed divestiture requirement on AT&T last June as condition for approval of its $44 billion buyout of MediaOne. Furchtgott-Roth said he didn’t know whether Commission would vote on AT&T question or whether decision would be made at staff level, for example by Office of Gen. Counsel or Cable Bureau.
Court’s basic message was that 30% limit on number of pay-TV subscribers that single MSO could control was “kind of plucked out of the air,” Furchtgott-Roth said. Court said FCC didn’t justify its selection of that figure, he said. Court didn’t say number had to be smaller, just that “whatever number is chosen, it can’t be arbitrarily determined,” he said.
Besides cable ownership cap, Furchtgott-Roth argued that court ruling “probably” had"some implications” for FCC’s broadcast ownership limit, which bars broadcasters from owning stations reaching more than 35% of TV homes nationwide. But he noted that in broadcasters’ case, Congress, rather than FCC, set 35% cap in Sec. 202 of Telecom Act. “I think the Commission could at least fall back and say there’s clear congressional guidance for that number” if it ever were challenged in court, he said. “I don’t know how it plays out.”
Noting that same court that ruled on cable ownership cap also struck down FCC’s equal employment opportunity (EEO) rules, Furchtgott-Roth said that in both cases court made it clear that Commission must tread carefully on constitutional protections. He said court recently asked FCC for its views on petitions by various parties for en banc hearing on EEO decision. He said he would prefer simply to eliminate current EEO rules and start over again. FCC also has appealed part of that decision.
On another issue, Furchtgott-Roth said he had “profound mistrust of “bill-&-keep” (B&K), which FCC is eying as possible replacement for current reciprocal compensation arrangement. B&K basically is “price regulation” and he’s skeptical whether it will work, he said. Telecom Act specifically calls for reciprocal compensation and FCC is weighing whether to throw that out to solve “policy problem” that could be solved in other ways, he said.
One way to solve “flow of money” problem is to change agency’s “pick-&-choose” (P&C) rule that hampers interconnection pacts between CLECs and ILECs, Furchtgott-Roth said. P&C rule lets any CLEC take parts of contracts that ILEC negotiated with other CLECs. Because agreements are based on give-and-take, ILECs have become hesitant to even negotiate with CLECs, Furchtgott-Roth said. If CLECs can take parts of contract that benefit them without making corresponding concessions, ILECs get short end of stick, he said. It’s okay to require ILECs to share entire contracts with CLECs, but allowing CLECs to enter into only parts of those contracts hurts process, he said.
As result, ILECs are refusing to enter into Sec. 252 interconnection contracts with CLECs, Furchtgott-Roth said, forcing states to come up with “certain available rates” to replace negotiated contract rates, he said. Another solution would be to allow carriers to directly pass through to customers expenses such as reciprocal compensation, he said, but that would be up to state regulators. FCC ought to come up with “one-graph order” that says this is intrastate issue and states should take care of it, he suggested.