Tales of the Sausage Factory

D.C. Circuit Affirms Inside Wiring In Fairly Broad Opinion. Terrestrial Loophole Next? And What About Time Warner's TV Anywhere?

While folks in the suburbs sometimes forget this, a lot of people live in what we call “multiple dwelling units” (MDUs) — which is a fancy way to say things like apartment buildings and condos. One of the problems for people trying to switch from one provider to another for cable (for example, from Comcast to RCN) is that a cable operator may already have an exclusive deal with the landlord to provide cable services to everyone in the building. Competitors asked the FCC to ban such practices. In 2003, under Michael Powell, the FCC refused to ban such exclusive deals because “regulation is always bad, mmmmkayyy.” In 2007, as part of Kevin Martin’s attack on cable market power evil vendetta against the helpless cable industry, the FCC reversed this determination and found that under Section 628(b) of the Communications Act (47 U.S.C. 548) it needed to prohibit cable operators from entering into or enforcing such exclusive deals because Verizon can’t sell FIOS w/out being able to offer triple play. Predictably, this was widely denounced by the cable companies and their cheerleaders as not merely unwarranted, but a violation of law and certain to be overturned on appeal.

Turns out, not so much. In fact, in a rather broadly worded opinion, the D.C. Circuit affirmed the 2007 Order. Indeed, the language affirming the decision opens the door to the FCC tackling other cable issues, such as the terrestrial loophole (which Verizon wasted no time in pointing out to the FCC). Mind you, it remains unclear at this point whether the new FCC will have any interest in cable market power or not.

Still, there are a number of important aspects about this case, especially its implications for the FCC to regulate Time Warner’s TV Anywhere strategy, aka “how cable operators plan to preserve their existing business model and fight off Netflix.” I discuss this in more detail below . . . .

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Tales of the Sausage Factory

Section 616: The Wheels of Justice Roll (albeit slowly) At the FCC.

Back last November, the FCC considered reforming various rules designed to limit cable market power. While the FCC did adopt rules limiting the size of cable operators to 30% of the market and lowering the rates for leased access, the FCC failed to move forward on reform of its rules for how independent programmers can file complaints against cable operators for unfairly discriminating against them based on affiliation or lack thereof.

But now things are looking up. Last Friday, the Media Bureau addressed several pending complaints and designated them for a hearing before an Administrative Law Judge. Unsurprisingly, the NFL got the media attention, but the more typical case was that of WealthTV — and it is that case that is therefore likely to have more long term impact on the industry (not that the NFL and MASN cases weren’t important as precedent).

This doesn’t eliminate the need for an Order that would clarify how the process works and set a reasonable time table for complainants and defendants, but it does help to move things along for those who dared to trust the process by filing a complaint, and may put heart into the rest of the independent programming industry to hang in there and keep trying.

More below . . .

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Tales of the Sausage Factory

Broadcast Flag Through The Back Door — Yet Another Episode of “Outsourcing Big Brother.”

The Motion Picture Association of America has asked the FCC to give it a waiver of something called the “selectable output control” rules for cable boxes. As usual, this apparently minor request for a waiver of an obscure FCC regulation of unknown origin, governing a highly-technical and mind numbingly boring set of rules about cable set-top boxes, hides a bold power grab designed to rip off every owner of a Tivo, VCR, or other perfectly legal recording device available to consumers to engage in the legal practice of recording television programs to watch them later (“time shifting”).

For details on this latest effort to circumvent limits on government by outsourcing the process to an industry cartel, aka “outsourcing Big Brother,” see below . . . .

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Tales of the Sausage Factory

Cable Ownership Limits: This Is The Jonathan Adelstein I know

OK, first, as our Great Hero and the real Favorite Son of South Carolina, Stephen Colbert would say: Martin as a true set of huevos grande. On Tuesday, when it looked like he was going down in flames, I opined that Martin wouldn’t risk touching cable again with a ten foot pole and wondered whether he would be relegated to the status of a “lame duck” Chairman. Boy was I wrong. Not only did fight his way back from a total loss to a partial win against the massed might of the cable lobby, but he has emerged determined to go on for another round in bringing cable market power to heel, and this time with no distractions about a la carte.

This time, it’s a vote on the proposed cable ownership limit. Under Martin’s proposal, a cable company may control no more than 30% of the total number of cable, satellite, or other “multichannel video programming distributor” (MVPD) subscribers. As usual, we in the media reform/diversity community have been pushing this for years and, as usual, the cable industry insists it is totally unnecessary, ilegal, fattening, and will mean that the terrorsts win.

So I take a moment to appluad Kevin Martin for his continued courage and willingness to do the right thing on cable, even while making a huge mistake on broadcast ownership. But perhaps more importantly, Jonathan Adelstein has jumped on this puppy and run with it. After the bitter disappointment of this past week’s cable vote, it is a much needed shot in the arm to see Adelstein back in his usual form as a defender of diversity and an opponent of market power. Not to take anything away from Michael Copps, mind, who as usual has a track record of opposing consolidation in cable and has worked with Martin on a host of issues limiting cable market power. I’m just saying that seeing Adelstein act decisively on this one restores my faith that while we may have disagreed on 70/70 (and as usual when these things happen, I’m the one whose right), it was an honest disagreement and not something more nefarious. So while I remain disappointed, I am no longer dismaly disillusioned or dismayed.

More below . . . .

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Tales of the Sausage Factory

Hot Bi-Partisan Action On Cable Part II — All Eyes On Adelstein As Cable Vote Nears

So I spent a good deal of time in Part I explaining why 70/70, leased access, and the rest of it are necessary steps to curb cable market power. You can also see the back and forth between MAP and the cable guys on whether the 70/70 threshold is met (for those of us that actually care about the substance) either by going to the FCC’s Electronic Comment search page and pluging in the docket number 06-189. Or you can check out what my friend Greg Rose has written on his blog. Because regardless of what you think the policy is, there is an actual empirical question here that — if we required cable companies to submit real subscriber numbers to the FCC rather than letting them file whatever the heck they want without any kind of verification or standard system of reporting — we would be able to answer.

And, as we head to a vote on Tuesday, Democratic Commissioner Jonathan Adelstein remains the swing vote. As regular readers know, I defended Commissioner Adelstein during the 700 MHz Auction fights when some of my friends in the movement wondered whether Adelstein was taking up the cause of the wireless companies against the consumer. Then, my faith was rewarded when Adelstein came out in favor of wholesale. Even though we ultimately lost that fight, there was no doubt that Jonathon Adelstein was on the side of the people not the special interests.

But now we come to cable. Where Commissioner Copps has always been a clear and unambiguous foe of cable market power, Adelstein has always been more … nuanced. For example, when Comcast and Time Warner divided up bankrupt Adelphia cable, Copps voted against the merger while Adelstein concurred in part and dissented in part. Adelstein used his concurrence to extract a promise from Chairman Martin to reform the cable leased access process. So was this going along with big cable or shrewd realpolitik? At the time, and still, I argued the later, trusting that Commissioner Adelstein’s longstanding support for diversity and strong stand against media consolidation belied the rumors that he was “soft” on cable consolidation.

More troubling was Adelstein’s recent concurring statement with Republican Commissioner Robert McDowell on denying Comcast’s request for a waiver of the 1996 law requiring cable operators to create an open, standard interface for cable set-top boxes. But OK, Adelstein did vote to deny the waiver and was apparently chiefly honked off that Martin was cutting Verizon a break but not Comcast. While I might disagree (giving Verizon two years to develop compliance for a non-cable system when Comcast and the rest of the cable industry got ten years on the same excuse doesn’t seem that outrageous to me — given that there are real honest-to-God technical differences between FIOS and cable systems and CableLabs, which developed the cable card standard, is a cable industry operation), I can at least understand where folks might get peeved at Martin’s apparent favoritism between the telcos and the cable cos (more on that in Part III). And, after all, Adelstein did vote to actually enforce the law against the cable industry.

But still the same ugly rumors persist — Adelstein is soft on cable. Adelstein is looking for an excuse to avoid the vote. Adelstein wouldn’t vote against cable on Comcast’s fight with The America Channel except that Copps voted with Martin and ADelstein didn’t want to look bad. etc., etc., etc.

Washington is a cynical town. It’s always easier to believe that people are acting because they are owned by this special interest or owe favors to that industry than to believe that people are trying to do their best in a complicated world. I am an oddball in starting from a position that I give those on the same side as me and those on the opposite side the benefit of the doubt until I see something that puts it beyond doubt that a person is favoring a private interest or industry over the public interest no matter what.

So we come down to the wire on cable. I’ve fought the cable industry on these issues for the last 8 years, and I am a newbie compared to some of the folks in the movement that lived to see the vote on Tuesday. I believe that, as an objective matter, the 70/70 cable penetration benchmark has been met — and was met at least as early as 2005. I continue to believe that cable exercises market power over programming and subscription rates and that the FCC needs to address these problems.

And I believe that Commissioner Adelstein, like Commissioner Copps, cares about diversity of programming and protecting consumers from cable market power. At least, I believe it now. And I hope I’ll still believe it after Tuesday.

Stay tuned . . . .

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Tales of the Sausage Factory

GOP To America: All Well In Cable-Land! Skyrocketing Rates and Lousy Customer Service All In Your Mind! Forget What We Said Last Summer About Needing COPE!

I must applaud the Republican House Commerce Committee members for their willingness to stay bought. Why else would 23 of the 26 Republicans on the House Commerce Committee send this letter celebrating the perfection of the cable industry in the United States and opening a can of whoop-ass on Kevin Martin for daring to suggest otherwise? Because if that letter came in response from hundreds of constituents complaining that their cable service costs too little and the service is too good, I’ll eat my lap top.

God knows, with the number of issues on their plate and with their party’s standing plummeting in the polls, you’d think Republicans would decline to publicly defend the cable industry. What with rates consistently rising faster than inflation (and despite increasing profits-per-subscriber until the last quarter or so), cable operators have raised rates every year – whether they need to or not. As if that were not enough, the customer service records of the major cable companies are abominable (or why would Mona “The Hammer” Shaw have attained folk-hero status?). So with us heading into an election, and the Republicans weighed down by all the baggage of the Iraq War, corruption scandals, accusations of cronyism and mismanagement, and a general anti-special interest sentiment in the electorate, you wouldn’t think the Republican party would rise up en mass to defend the cable industry from one of their own?

And yet that is precisely what 23 Republican members of the House Commerce Committee just did. Upset that Kevin Martin has proposed several items for the next FCC meeting that limit cable market power, the Commerce Committee Republicans have leaped to the defense of the cable industry. “Shame!” They have cried to Kevin Martin. “All is well in cable-land! The industry is intensely competitive, prices are low, service is wonderful, and consumers are bursting with happiness! How can you even think of regulating the cable industry?”

Mind you, these are the same Republicans who in the summer of ’06 were so gosh darn concerned about the lack of cable competition that they were all set to completely rewrite the Telecom Act to help phone companies get into video. Because God knows if we didn’t deregulate phone companies we couldn’t get any competition for cable, and Lord knows we needed competition for cable. But when you are a member of the Republican Party and you see a special interest and regular campaign contributor in need, you don’t worry about such fiddlin’ details as consistency with your past positions. Either that, or we should assume Mr. Barton, Mr. Upton, and the rest that championed the “we must deregulate the phone companies to bring competition to cable” bill in 2006 believe that the whole competition thing worked itself out, so that is now — in the words of the 23 Commerce Committee Republicans — “significant competition in the video programming marketplace.”

So now we see the delightful sight of Mr. Barton, Mr. Upton, and the rest of the Republican Cable Commerce Cheering Squad, who last summer couldn’t vote fast enough to deregulate because we needed cable competition, taking FCC Chairman Martin out to the woodshed for daring, DARING to suggest that cable has market power and that therefore the FCC should take steps to address this problem, or at least bloody recognize the reality. (Apparently, flip-flopping is not a problem if it is bought and paid for flip-flopping.)

So rest assured America, in the fight between your personal well-being and the profit margins of GOP campaign contributors, you can always count on the Republicans to stay bought and stand up for special interests.

Stay tuned . . . .

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Tales of the Sausage Factory

Time For Some Hot Bi-Partisan Action on Cable: Or, Why Copps and Adelstein Need to Work With Martin Here Part I

I gotta hand it to the NCTA – they really know how to spin the press. Given the outrageous excesses of market power displayed by incumbent cable operators, you would imagine that activists would leap at the opportunity offered by Kevin Martin to reign in cable market power – regardless of whether one likes Martin personally or thinks he is a Bellhead or industry tool in other respects. But no, over the weekend, the NCTA has done an exemplary job of spinning the upcoming sledgehammer to cable market power as a bad thing.

I am talking primarily about the news that the FCC may invoke the “70/70″ provision of Section 612(g) of the Communications Act (codified at 47 U.S.C. 532(g)). For those not as obsessed with the Communications Act as yr hmbl obdnt, this provision states:

[A]t such time as cable systems with 36 or more activated channels are available to 70 percent of households within the United States and are subscribed to by 70 percent of the households to which such systems are available, the Commission may promulgate any additional rules necessary to provide diversity of information sources. Any rules promulgated by the Commission pursuant to this subsection shall not preempt authority expressly granted to franchising authorities under this subchapter.

Now you would think anyone who opposes media concentration would be jumping for joy here, wouldn’t you? At last, a clear source of authority for the FCC to regulate cable in the name of diversity, and a directive from Congress to do it (without preempting local franchise authorities). And one would certainly expect that the Democratic Commissioners, Copps and Adelstein, who have repeatedly shown themselves stalwart champions of diversity and enemies of consolidation, would rush to seize the moment. But while I hope the later is true, some normally sensible people are buying into the cable spin that this is somehow bad because (choose however many apply):

A) It’s an “archaic leftover” of another time and nowadays cable is “highly competitive.”

B) It’s not really true that the 70/70 test is met anyway so the courts will just reverse it.

C) Kevin Martin is an evil Bellhead who has it in for cable, wants to deregulate broadcast media, and shafted local franchising authorities, so you know this must somehow be evil, even though it is something media reform advocates have fought for over 20 years to achieve.

D) Somehow, this is just an effort to distract us from the fact that Kevin Martin is an evil Bellhead who eats puppies and throws kittens into trees for his amusement.

E) Martin is just slapping the cable guys around because they didn’t do family tier.

G) Somehow this helps Kevin Martin deregulate the broadcast industry.

Having spent the last several years trying to get the FCC to recognize the goddamn truth that 70/70 was met years ago, and trying to get the FCC to address leased access and carriage complaint issues, the 30% cable ownership cap, and a bunch of other reforms to address cable market power, I am just a shade peeved to see folks who should know better eating out of NCTA’s hand. Because public policy is not about whether I like or dislike the current FCC Chair or whether I would rather he focus on reigning in telcos rather than cable cos. It’s about what is the best public policy. And what Martin has put out for a vote: 70/70, reform of leased access and the carriage complaint process, and reaffirming the 30% cable ownership cap, are all things justified by the record and urgently needed.

We have already seen that when the Democrats work with Martin to protect independent programmers, good things happen. Holding the cable operators accountable under the set-top box law, letting The America Channel arbitrate its case against Comcast, these are areas where Copps and Adelstein recognized that their interest in promoting diversity and free expression converged with Martin’s interests in restricting cable market power and worked together to create well-crafted rules that promote the public interest without selling anyone out. This is that “bipartisan” thing everyone claims they want – work together where you can, oppose each other when you must, and always keep in mind the public interest rather than your partisan ends.

Below, I run through some background on what’s going on — especially with the 70/70 test. Since that will make this ridiculously long, I will save for Part II why Copps and Adelstein need to seize this opportunity before the NCTA gets a chance to work its mind-clouding magic and once again get a quorum to vote that slavery is freedom and market power is competition. And, since Martin’s motives appear to absolutely rivet everyone’s attention, I will give my best speculative guesses followed by my explanation of why Martin’s motives don’t matter. Because, as in all good politics, Martin has maneuvered it so that he will get his political pay off whether the Democrats vote for the cable items or not. So rather than waste the best chance at cracking cable market power in the last 20 years and give Martin a political victory anyway, the only sensible thing to do is vote for the items and make it clear that doing the right thing in cable over here doesn’t give Martin a pass on previous bad Orders (like preempting local franchise authority) or give a license to deregulate broadcast ownership.

More below . . . .

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Tales of the Sausage Factory

The Media Ownership Endgame: Martin's Opening Gambit on Newspaper-TV Cross Ownership

As I’ve said before, Kevin Martin plays a mean game of hardball — but an honest one. And while I’m happy to have him on the right side in limiting cable market power, it makes fighting on the media ownership side an utter bitch and a half. Like Belichik prepping the Patriots, Martin has carefully studied the mistakes of Michael Powell, studied the strategies of the media reform movement, carefully considered his own strengths and weaknesses, and set up his game plan with a determination to win.

This tends to make some of my friends and colleagues in the movement hate Martin personally, or get bogged down in the distractions and the moves Martin throws. But that’s as stupid as letting yourself get distracted by trash talk. To win this fight, we need to keep our eye on the game, stay nimble, have our own special teams prepped, and remember we’re in this to win in the long haul.

With this in mind, we turn to the opening moves in Broadcast Media Ownership Endgame. Martin already has one key advantage in that because he is the Chairman, he can set the agenda. He controls the timing and can float trial balloons, decide when to hold new hearings or release new studies, and finally declare when he wants a vote. Martin demonstrated his skill in this over the last month, gradually building to the end game, alternating period when nothing seemed to be happening with sudden frenzied activity. Each such move requires us to mobilize resources and exhaust ourselves, and forces us to make process demands for more time and reasonable opportunities for comment. Martin can then chose to acede to our requests in a limited way, letting a deadline slip a few weeks or postponing something by a month. This makes it look like Martin is being reasonable and accommodating, and casts us in the role of partisan foot draggers. Worse, it makes it increasingly difficult to mobilize our troops, because how many times do we have to fight and win these minor skirmishes over procedural issues and timing? People get tired of the issue, or think we already won when what we achieved was merely a temporary respite. Then, like a matador administering the coup de grace on the exhausted bull, Martin plunges his point directly into the heart. (‘Scuse me a minute, I need to check to see if my ears and tail are still attached.)

But Martin has now clearly committed to the final moves of the end game with a PR blitz/charm offensive similar in many ways to his approach in the 700 MHZ proceeding. And, as with the C Block “open access” condition, I do not expect Martin to make signifcant changes to his proposal now that he has put himself out in front and committed to a public position. Martin the Matador has dropped the cloak and gone for the sword. The question is whether the media reform bull is as exhausted or confused as Martin thinks, or if we still have sufficient wits and stamina to give him a surprise.

More below . . .

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Tales of the Sausage Factory

Comcast Morally Outraged That America Channel Adjusts Business Model to FCC Rules. Cats outraged when mice fight back.

Some of you may recall The America Channel and their efforts to blow the whistle on Comcast’s exercise of market power in the cable programming world. As part of resolution of the Adelphia transaction, the Commission declined to provide any specific relief for The America Channel. They did promise to have a general rulemaking on the carriage complaint process (whereby independent programmers complain that cable operators have illegally discriminated against them) and the leased access process (whereby independents can lease access to the cable system) (a proceeding the Commission announced last month). The Commission also created special protection for regional sports networks (RSNs) so that Comcast could not do unto others as they did unto Mid-Atlantic Sports Network. As part of the FCC’s order approving the Adelphia transaction, a regional sports network can demand carriage on Comcast or Time Warner, and can require that an arbitrator resolve the cost issues.

TAC, seeing that it would get nowhere with its old programming idea, proceeded to reinvent itself as a regional sports network. It has deals with a number of NCAA Division I schools — particularly for the less popular women’s sports, which it will bring to the various regions the schools are in. TAC will pay for the production costs but will not pay for the games themselves, a reversal of the usual royalty agreement I understand. TAC has gotten carriage on cable overbuilder RCN, provided TAC can reach the critical mass of carriage on other providers to achieve viability.

So how’s that working out, and what will the FCC do? More below . . . .

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Tales of the Sausage Factory

Look what the FCC Found in the Basement!

In response to a Freedom of Information Act Request filed by the Georgetown Institute for Public Representation Communications Law Projects and my employer Media Access Project, the FCC has now posted a collection of 42 final and draft reports relating to media ownership (no Hitchker’s Guide jokes please. Anyone who thinks these studies are definitive answers to anything needs to find their towel and get a life).

A very preliminary bit of analysis below….

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