FCC opts to unclog cable route


WASHINGTON -- The FCC narrowly approved new regulations Wednesday that make it more difficult for local governments to interfere with new cable industry competitors entering the video marketplace.

At the same meeting in which the video franchise rules were approved by the commission in a 3-2 vote, FCC chairman Kevin Martin released a new report showing that the prices most Americans pay for cable has nearly doubled in the past 10 years. The report found that in 2004, rates for basic and expanded cable service, which account for slightly less than 85% of subscribers, rose 5.2%. For the previous decade, prices rose 93%, the commission said.

Under the new franchising rules, local cable authorities must act within 90 days on new applications for access to local rights-of-way and within six months for other new competitors. Most local governments regulate cable TV and utility companies through use of public rights of way.

Forcing the local governments to act could give cable newcomers like AT&T and Verizon Communications a competitive advantage over incumbent cable TV companies.

The FCC also will ban local governments from forcing new competitors to build out new systems more quickly than the incumbent carriers and to count certain costs required of new carriers to go toward the 5% franchise fee they must pay.

Democratic commissioners Jonathan Adelstein and Michael Copps harshly criticized the measure, questioning the agency's evidence that there are barriers to entry by competitors. They also expressed concern over a loss of local control by franchise authorities over cable companies and expressed concerns over whether the FCC has the legal authority to impose the new rules.

"Today's item goes out on a limb in asserting federal authority to preempt local governments, and then saws the limb off with a highly dubious legal and policy scheme that substitutes our judgment as to what is reasonable for that of local officials -- all in violation of the franchising framework established in the Communications Act," Adelstein wrote. "In my years working on Capitol Hill, I learned enough to know that this is legislation disguised as regulation."

National Cable & Telecommunications Assn. president and CEO Kyle McSlarrow called the rules an "astonishing step backward" and refused to rule out a legal challenge to the new rules.

The cable industry questions both the policy -- arguing that telecommunications companies are now getting into the video market with relative ease -- and the commission's authority to take the action. "We see no justification or the authority for disparate treatment of us and the phone companies," McSlarrow said.

Martin said he sees no such problem with the commission's order.

"This item appropriately removes such regulatory barriers by giving meaning to the words Congress wrote in (the video franchise section of) the Cable Act," he said. "Specifically, the commission finds that a (local franchising authority) is unreasonably refusing to grant a competitive franchise when it does not act on an application within a reasonable time period, imposes taxes on noncable services such as broadband, requires a new entrant to provide unrelated services or imposes unreasonable build-out requirements."

Martin's view was shared by the Bells. Verizon federal regulatory affairs senior vp Susanne Guyer said the commission's action "will fast-forward the delivery of new choices, lower prices and better services to consumers."

She said the new rules will enable the company to reach agreements with local governments faster.

The price survey also showed that competition from direct broadcast satellite competitors like DirecTV has little if any effect on cable prices, while in areas where there are wire-line competitors, like municipal cable providers and overbuilders like RCN Corp., rates are 17% lower.

Telecommunications companies like Verizon and AT&T have been lobbying aggressively to make it easier to obtain local franchises as each company sinks billions of dollars into its networks in order to deliver video programming.

The approval came despite a warning from the incoming chairman of the House Energy and Commerce Committee questioning whether the FCC has the legal authority to issue the new rules.

In a letter written Tuesday, Rep. John Dingell, D-Mich., wrote, "It would be extremely inappropriate for the Federal Communications Commission to take action that would exceed the agency's authority and usurp congressional prerogative to reform the cable television and local franchising process."

Critics have claimed that there are no guarantees that new competitors will result in lower prices for consumers.

"Consumers are ill-served by the commission's decision to let phone companies pick and choose which neighborhoods will get more choice for cable service and which will be left with only their monopoly cable provider, facing both rate hikes and no hope of any alternative," Consumers Union senior policy analyst Jeannine Kenney said. "Unless consumers receive assurances from both the FCC and the Bells that cable rates will actually decline for all customers in a market after phone companies begin offering service, FCC's decision may do more harm than good."