Cable escapes stricter FCC rules, for now

Cable's fierce lobbying over the threat of expanded government control paid off late Tuesday night, as federal regulators approved a watered-down proposal that does not immediately open up the possibility of new regulations.

Kevin Martin,
FCC chairman

After a rocky day of closed-door negotiations, which delayed the scheduled 9:30 a.m. EST start time of the Federal Communications Commission's meeting by nearly 12 hours, FCC Chairman Kevin Martin caved to pressure from fellow commissioners over how to handle a contentious cable competition report.

That outcome could derail any future efforts by Martin to push through controversial new rules for cable operators--most notably, his longtime goal of requiring them to sell consumers packages of channels on an "a la carte" basis. (Consumer groups adore the idea, but the cable industry contends it'll only raise prices and reduce subscribers' choices.)

At issue at Tuesday's meeting was this year's iteration of an annual report to Congress in which the FCC attempts to quantify competition in the cable industry. An original version of this year's report found, based on a single data source, that the share of Americans who subscribe to cable has climbed to 71.4 percent. (The text of the final, approved report wasn't immediately released by the FCC.)

That's significant because, if that finding was adopted, it would have activated a section of federal law known as the 70/70 rule. That rule dictates that FCC can impose "any additional rules necessary to promote diversity of information sources" if it finds that cable systems that offer access to 36 or more channels are available to 70 percent of American households, and that 70 percent of those households actually subscribe to cable. That first prong has long been satisfied, but a firestorm of debate has surrounded whether the subscriber threshold has also been crossed.

The cable industry promptly attacked the 71.4 percent figure, which came from a study by trade publisher Warren Communication News, and continues to say it has numbers that show otherwise. Both Democratic and Republican members of Congress also cautioned against additional regulations in recent days, with some arguing that competition in the video market is robust, thanks in part to the growth of Internet-based content.

Martin continued to defend the data on Tuesday night, arguing the commission has used it for three previous reports because it's the only source that keeps tabs on subscribership to cable systems with 36 or more channels, as the law requires.

But, in an apparent concession to the cable industry, he agreed after much haggling in recent days to compromise and take a look at other data sources as well.

Cable operators--including telephone companies that offer video services--will be required to provide ZIP-code-by-ZIP-code data on the total number of homes and subscribers they have within 60 days, according to an FCC press release sent early Wednesday morning.

The cable industry was quick to applaud Martin's change of heart and the commissioners who balked at the original report. In a statement, National Cable and Telecommunications Association President Kyle McSlarrow said he welcomed the opportunity to provide additional data, which he said "will confirm that the commission was correct in rejecting the 70/70 finding today."

To regulate or not to regulate?
Cable's reprieve from regulations, however, may be only temporary. Both Martin and Democratic FCC Commissioner Michael Copps said they believe the new data will bolster the finding that the number of subscribers has surpassed the 70 percent threshold, therefore opening up the need for increased government intervention.

Additional numbers submitted to the FCC by public-interest groups and "at least one industry source" (which appears to be AT&T) back up those subscriber numbers, Copps said. "In light of these facts, I think that the most responsible course of action at this point is for the commission to act swiftly to compel the industry to open up its books to put this question to rest once and for all," he said Tuesday night, according to a written statement provided by the FCC.

Still, two other commissioners who fought Martin on the report, Democrat Jonathan Adelstein and Republican Robert McDowell, offered a blistering critique of the process. They suggested the chairman had attempted to rig the report's findings and to ignore valid data sources in order to support his own policy goals. In their written remarks, they also said they were also disturbed that, just two hours before the late-night meeting began, FCC staff shared the results of a 2006 FCC survey indicating that cable subscription rates had only reached 54 percent.

"We cannot cook the books to pursue a political agenda without dismantling our very institution," Adelstein said in prepared remarks Tuesday night. "We simply must act like the expert agency Congress intended, and not squander our precious legacy."

The fifth commissioner, Republican Deborah Taylor Tate, said she also believes a "broader universe of information sources" must be considered.