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NCTA Could Sue FCC Over Franchise Item

By John Eggerton -- Broadcasting & Cable, 12/20/2006 4:35:00 PM

National Cable & Telecommunications Association President Kyle McSlarrow wouldn't commit to taking the FCC to court over its decision Wednesday to revamp local video franchise rules, but he suggested that was a likely course of action.

He said NCTA would have to see the actual order first before deciding, but that it was keeping its options open. But he went further by saying that the industry's core value was equal treatment and that the FCC had not provided that.

NCTA has not opposed franchise reform, per se, that would ease telco entry into video and broadband, but it has said that whatever changes the FCC has made should apply equally to cable and telcos.

"This is not a level playing field," said McSlarrow in a conference call to reporters.

He also echoed commission Democrats in suggesting the FCC had overstepped its regulatory authority and was essentially legislating by proxy.

McSlarrow had some positive things to say about the FCC's order. He said that the order at least made it clear that telco AT&T could not argue it did not have to apply for franchises because its service was Internet-based. He was also pleased the order had pared back its preemption of state laws.

But on the key issue of treating all providers equally from day one, the FCC decision fails the cable industry's key test.

The FCC said that it would look into whether the same franchise reforms should apply to incumbents, though it suggested they should. But it also said incumbents shouldn't get that same treatment until their current franchise agreements expire, which in some cases is years away. The FCC also says its new order will preempt most-favored-nation clauses in existing contracts. Those contracts insured that if a new entrant got a better deal from a franchising authority, the incumbent cable operator also got that deal, and vice versa.

Because of that essential inequity, McSlarrow said, the FCC's result would be more regulation, not less. "Treating different players differently is a recipe for regulatory arbitrage," he said. It would also appear to be a recipe for a court battle.