Cable System Size Doesn't Determine Whether It Faces Effective Competition, Wheeler Says
The FCC order making effective competition a rebuttable presumption is based on the fact that the size of a cable system “bears little relationship” to whether it faces effective competition, said FCC Chairman Tom Wheeler in a statement Wednesday. “Where there is 'Competition, Competition, Competition,' the need for basic service tier rate regulation is diminished,” Wheeler said. The FCC's most recent report on cable industry prices shows the average rate for basic service is lower in communities with an effective competition than in those without,” said Wheeler. The effective competition order won 3-2 approval by the Commission late Tuesday (see 1506020060), but the text still hadn't been released as of late Wednesday.
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“There has been no evidence in this proceeding to suggest that our previous findings of Effective Competition in thousands of communities led to any changes in the tier placement of local broadcast stations, he said, referring to broadcaster concerns that a lack of rate regulation would lead to broadcasters being bumped off the basic tier. Competition leads to lower prices for consumers, Wheeler said. Local franchising authorities are also “free to come to the FCC and rebut this new presumption” for their service areas, Wheeler said. Nothing in the order “affects other franchising authority responsibilities including the collection of franchise fees, provisions relating to [public, educational and government] channels and I-Nets, and the creation and enforcement of customer service standards,” he said.
Broadcasters and public interest groups lobbied the commission hard in opposition to the proposal to extend the relief for small cable required by Satellite Television Extension and Localism Act Reauthorization Act to all cable systems, with some groups visiting the eighth floor into Tuesday afternoon. Tuesday was the statutory deadline for the rule change as required by STELAR.
The FCC order “clearly contradicts” the language of STELAR, NAB said in a statement Wednesday. Industry and FCC officials have told us it was supported by Chairman Tom Wheeler and both Republican commissioners, while both Democrats approved granting the rebuttable presumption to smaller cable companies but dissented from granting it to larger cable companies (see 1506020060). “It's disappointing and surprising that as cable customer satisfaction ratings plunge to a record low, the FCC believes it is wise to gut the one protection that allows local municipalities a chance to protect consumers from abusive treatment and consistently skyrocketing rates,” an NAB spokesman said in the statement.
Though some cable attorneys told us the vote is a large defeat for NAB, considering the effort they expended, other attorneys on both the cable and broadcast side disagree. Since the original NPRM proposed nationwide effective competition and then the draft order was circulated to the eighth floor with that proposal, broadcasters started out in a hole, the attorneys told us. This order is also a rare instance of the commission's Democrats not voting with Wheeler, a broadcast attorney pointed out.
Several cable attorneys have told us they expect broadcasters to suffer few consequences despite losing the battle at the FCC. “It's a tempest in a teapot,” said BakerHostetler cable attorney Gary Lutzker. Copyright rules would lead to greatly increased licensing fees for any cable company that bumped broadcasting to a higher tier, and that it hasn't happened in places that have already been found to face effective competition shows that the FCC rule change won't lead to a shift for broadcasters, he said.