FCC Lobbied by Industry Just Before Program Access Order Circulated

DBS providers, cable operators and programmers lobbied the FCC for their preferred options to change program access rules, ex parte filings posted Friday in docket 12-68 show. Companies shared their differing views on the effects of vertical integration of multichannel video programming distributors (MVPDs) and whether the ban on exclusive programming deals should be permitted to sunset. That was before the draft order circulated late Friday. A commission spokesman didn’t immediately respond to our query.

DirecTV, opposing a sunset, rejected an economic report from NCTA (http://xrl.us/bnpsek). The report filed earlier this month in the docket “provides no basis for abandoning the regime currently in place,” the company said in an ex parte filing (http://xrl.us/bnpsex). The report “mostly recycles arguments that the commission and courts have already rejected,” it said. Some of the report’s assertions are “inconsistent with economic arguments made to the commission by cable operators in other recent proceedings,” DirecTV said. NCTA said an exclusivity prohibition “is only appropriate if exclusivity is always harmful, and that otherwise, a case-by-case formulation is required.” This formulation “does not account for the substantial costs ... in pursuing a case-by-case remedy for withholding,” DirecTV said. “Such costs can make bright-line rules more preferable than individualized determinations.” NCTA suggests that exclusivity “should be allowed unless it would threaten the competitive viability of rival MVPDs,” DirecTV said. The FCC should reject this formulation as it did when Cablevision and its Madison Square Garden affiliate used the same argument in recent program access cases, DirecTV added.

The Independent Telephone & Telecommunications Alliance urged the commission to extend the contract exclusivity prohibition for an additional five years. On video content access, the wholesale market “remains virtually unchanged in terms of vertically-integrated MVPDs’ ability and incentive to withhold programming from competing MVPDs,” ITTA said in an ex parte filing recounting a meeting with David Grimaldi, Commissioner Mignon Clyburn’s chief of staff (http://xrl.us/bnpsd8). An extension is necessary because reliance on existing provisions, like the commission’s program access complaint process, “would be wholly ineffective, particularly for smaller, new entrant MVPDs,” ITTA said. The program access complaint process “is inadequate, even for large, well-financed MVPDs,” it said. The complaint process also is unusable for smaller and new entrant MVPDs “who cannot devote the substantial time and resources required to pursue such relief,” ITTA added.

The American Cable Association said the FCC’s implementation of the rules “has provided less protection for small and medium-sized MVPDs than Congress intended,” in a meeting with the Office of Strategic Planning. In practice, the rules prevent a buying group like the National Cable Television Cooperative “from filing legitimate complaints,” ACA said (http://xrl.us/bnpsfw). ACA urged the FCC to ensure that the rules “may be effectively utilized by a buying group,” and to close the uniform price increases loophole, “by prohibiting a cable-affiliated programmer from charging a price above ‘fair market value.'” The association asked the FCC to clarify its definition of “buying group.” The commission should include in its definition “an additional liability option that an entity can satisfy in order to qualify as a buying group for program access purposes,” ACA said.

Time Warner Cable rejected claims in the docket that vertical integration results in competitive harm. Alleged incentives of cable operators that withhold content don’t “constitute an adequate justification for the commission to continue its categorical ban on exclusive contracts involving ’satellite cable programming vendors’ that are affiliated with a cable operator,” the operator said. The core of these arguments is “unsupported and unsupportable,” it said (http://xrl.us/bnpsf2). There are numerous vertically integrated programming services “that lack market power under any conceivable measure,” it said: “Exclusivity arrangements involving such programmers would not harm competition ... regardless of vertical integration.” There’s no justification for presuming news services pose a threat to competition merely on the basis of vertical integration, “particularly when the commission reached the opposite conclusion in the 2010 Program Access Order,” the company said. The same is true of other programming services that happen to be affiliated with a cable operator, it added: The mere fact of vertical integration doesn’t and can’t determine “whether the withholding of such programming from rivals would result in net competitive benefits or harm.”