Wednesday, November 21, 2007
FCC Chairman Riles Cable Industry Chairman Martin

The Associated Press
Tuesday, November 20, 2007; 8:38 PM

WASHINGTON -- A long-simmering dispute between the chairman of the Federal Communications Commission and the cable television industry has reached a boiling point, with a potential showdown shaping up for the agency's next meeting.

FCC Chairman Kevin Martin has proposed a series of initiatives, scheduled for a possible vote at a Nov. 27 meeting, that are opposed by the industry. One that could mean new regulation of the cable industry has prompted criticism from a fellow Republican commissioner and from House GOP members.

The most controversial issue is an upcoming report on competition in the pay-television industry. According to FCC officials, the report will show that the cable industry now reaches enough subscribers to trigger the so-called 70-70 rule.

Created by Congress in 1984, the rule says that when cable systems with 36 or more channels are available to 70 percent of U.S. households, and 70 percent or more of those households subscribe to cable systems, the commission may "promulgate any additional rules necessary to promote diversity of information sources."

What that means, exactly, is the subject of some dispute, as is the methodology used to show whether the threshold has been met. The FCC does not keep its own numbers on cable subscribers, but instead relies on figures provided by private companies, which can vary.

Regardless, AT&T Inc., a company that competes fiercely with the cable industry for high-speed Internet access and increasingly for video customers, has said the threshold likely has been met. The company is joined by several consumer groups which have claimed for years that the industry has exceeded the threshold.

Martin may use that finding as ammunition to push other proposals designed to help companies that are not affiliated with the big cable system owners to get their programming into homes.

None of Martin's proposals has been made available to the public. Critics and supporters alike have relied on information gleaned from news reports to figure out what is being proposed.

So far the reaction from members of Martin's own party has been negative.

Republican commissioner Robert McDowell, speaking at a Media Institute luncheon Monday, called Martin's plan a "radical departure for the commission _ a departure being made without sufficient chance for public comment." The commissioner noted that the cable industry has been losing customers in recent years, not gaining them, as competition has grown from satellite service.

On Tuesday, 23 Republicans on the House Energy and Commerce Committee wrote a letter to the five commissioners saying the enactment of the 70-70 provision is "inappropriate at best and contradicts the statute at worst." The letter asks for details about a laundry list of cable-industry-opposed initiatives, including Martin's support for the creation of an "a la carte" system.

A la carte would allow viewers to pay only for the channels they want to watch. The cable industry is very much opposed to such a system, which would disrupt the industry's economic model. The industry says it would result in higher prices for subscribers and would endanger programming aimed at minorities.

Kyle McSlarrow, president and CEO of the National Cable & Telecommunications Association, all but declared war on the Martin-led commission last week, calling it "broken" in a conference call with reporters. He theorized that Martin may be trying to pressure the industry into adopting an a la carte system, "to do voluntarily what the FCC does not have the authority to mandate."

A vote on the video competition report is scheduled for the Nov. 27 meeting. Martin, however, in the past has pulled items from the agenda at the last minute if he doesn't have the votes to approve them.

Two other cable proposals are also up for consideration, both related to independent programming.

Cable companies are required to set aside channels to lease to independent programmers. The agency has received complaints that rates are too high and has proposed to cut them by 75 percent. The hope is that lower rates would draw more independent programming. The cable industry says rates are fair and need not be tinkered with.

The commission also will consider whether to approve the creation of an arbitration system to resolve carriage disputes between cable system operators like Comcast Corp. and Time Warner Cable Inc. and independent cable networks like the NFL Network and the Hallmark Channel.

The meeting also will include a host of proposals concerning minority ownership in the broadcast industry. Martin has suggested in speeches a plan that would require broadcasters to lease excess channels that will be made available following the transition to digital television to small businesses that may be owned by women and minorities.

The cable industry is concerned that the agency may force cable companies to carry those channels, something it strongly opposes.