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from: Consumer Affairs

FCC Chief Seeks New Restrictions On Cable TV
Stepped-up regulation comes as telecoms turn up the heat on cable

by Martin H. Bosworth
ConsumerAffairs.Com

November 13, 2007

Federal Communications Commission chairman Kevin Martin is advocating new regulations for the cable television industry that may level the playing field for smaller competitors -- but which may also leave cable incumbents vulnerable to challenges from big telecom companies.

Martin's plans are outlined in the commission's annual report examining the state of competition in the cable television market, according to an FCC official who got an early look at the report.

The strategy is built on an obscure section of the 1984 Cable Act called the "70/70 Rule." It provides that if 70 percent of American households can receive cable services, and 70 percent of those households subscribe, the industry is once again subject to greater federal control.

Martin's plans including slashing the "lease access" payments that smaller television programmers pay large cable companies to use spare channels, and to impose a national "ownership cap" that would prevent any single cable company from having more than 30 percent of available subscribers in a region.

Sources say Martin is confident that he has enough votes on the commission to pass the proposed changes.

Although the report will not be released until the FCC's November meeting, the leaked plans set the technology and communications world abuzz. Consumer groups largely hailed the plan as a welcome change for the largely monopolistic and anticompetitive cable industry, while cable executives were considerably less enthused.

"Twisting statistics in order to breathe life into this rule is simply another attempt to justify unnecessary government intrusion into a marketplace where competition is thriving and new technology is providing consumers more choices, better programming and exciting new interactive services," said Kyle McSlarrow, president of the National Cable & Telecommunications Association (NCTA).
Cable crusade

Martin's proposed plans are the latest salvo in his crusade to change the cable industry. He has lobbied extensively for cable companies to carry "a la carte" programming, where customers only pay for the channels they want. The "a la carte" model, which won support from providers like Cablevision, was part of Martin's desire to appeal to religious conservatives who disapproved of cable providers' more sexually explicit channels.

Consumer groups also largely support "a la carte" models of programming, as it prevents subscribers from paying high fees to subsidize less popular channels that are bundled with better-known offerings.

More recently, Martin proposed rules that would outlaw apartment building managers and condominium associations from granting exclusive contracts to cable providers, claiming the practice harmed competition and subjected low-income families to high cable prices.

Challenges to cable's domination couldn't come at a worse time for the business, as aggressive competition from Verizon's FiOS service and AT&T's U-Verse are chipping away at cable's success. Time Warner Cable's earnings for the third quarter of 2007 showed its penetration rate in territories dropping to 50 percent, losing 83,000 subscribers in some of its biggest areas.

And cable heavyweight Comcast is under fire from consumer advocates and net neutrality supporters after the discovery that the Philadelphia-based company actively interferes with users' traffic, including blocking usage of the popular BitTorrent file-sharing service.
Hidden agenda?

Martin's pro-regulation stance towards the cable industry is unusual, given his marked tendency towards limiting government's role in business in almost every other respect.

Even as news of Martin's plan was leaked, the FCC chair was being criticized for rushing a planned vote on relaxing rules against media consolidation. Several Senators introduced legislation specifically designed to slow down the process and grant consumers more time to voice objections.

Martin has seldom crossed his friends in the telecom industry, doing his part to shepherd the mega-merger of AT&T and BellSouth late last year, creating the world's largest telecommunications company. Martin has also aggressively supported new video franchising rules that enable telecom companies to bypass state and local ordnances to roll out their video offerings--ordnances that cable competitors comply with.

Even when the major telecom companies were implicated in the National Security Agency's warrantless wiretapping program, Martin declined to use the FCC's power to investigate, citing national security concerns and the fear of divulging state secrets.