Tales of the Sausage Factory

Will The DC Circuit Pull The Plug On Program Access?

Next week, the D.C. Circuit will hear oral argument on the FCC’s 2007 decision to extended the program access rules another five years. What surprises me is how few people seem to have considered the possibility that the D.C. Circuit will reverse this decision and vacate the rule, as they did last month with the 30% cable horizontal ownership limit.

Part of that is the way people tend to make analysis based on conventional wisdom. “Everyone knows” that without the program access rules, competitive providers would be toast because the largest cable incumbents can control programming, just as “everyone knows” that we don’t need a 30% cable ownership limit because the MVPD market is so wildly competitive that the largest cable incumbents can not possibly influence cable programming. As Comcast and Cablevision pointed out to the DC Circuit, however, the conventional wisdom in this regard is not entirely consistent. If, as the court found last month as a matter of law, the MVPD market is wildly competitive and consumers switch willy-nilly from one to the other rendering it impossible for a cable provider to block a rival programming network from emerging, how on Earth can cable programmers below the 30% limit exercise foreclosure?

There are, of course, sound answers to that in both law and economics, although the biggest single deciding factor is likely to be the absence from the panel of Douglas Ginsburg, a man who believes membership in the Federalist Society substitutes for an actual understanding of economics and has published an academic article yearning for the “good old days” when the courts made economic regulation unconstitutional and concluding that courts should not defer to agency efforts to create “synthetic competition.” (An offense in the eyes of the Gods of the Marketplace.) I believe the panel is Sentelle, Griffith and Kavanaugh, which is not exactly good news for the program access rules but isn’t death on wheels like Ginsburg (or Williams or Edwards). Sentelle and Griffith, who were both on the imaginary competition outweighs real competition decision back in June overturning the FCC’s decision not to grant Verizon a forbearance petition, and Kavanaugh, who was on the cable ownership panel and therefore presumably agrees that switching costs aren’t real and cable operators are in such fear of youtube clips they would never make programming decisions based on affiliation. On the flip side, Kavanaugh actually wrote the somewhat more deferential special access opinion from July. Unfortunately for those who rely on program access, none of the judges who affirmed the Inside Wiring Order are on this panel.

Of course, there is something to be said for actual law and analysis of the underlying FCC Order, even in the D.C. Circuit. So below, I shall provide a brief outline of the program access rules, how we end up in court, the likely arguments, and what happens if the D.C. Cir. overturns the rules (which even I give a low probability to, but do not discount — especially given the panel) — including why that might actually be the best thing to happen to cable regulation in the long run.

More below . . .

Read More »

Posted in Cable, Tales of the Sausage Factory | Also tagged , , , , , | Comments closed

Tales of the Sausage Factory

The Fragmentation Games Continue: Cable Has a Plan So Cunning Even THEY Can't Figure It Out.

So back in September ’08, when ESPN.com cut a deal with Verizon and AT&T to lock out subscribers to rival ISPs, I predicted the cable guys would try to lock up content of their own. and, indeed, the cable guys have proven uniquely ambitious. As reported at DSL Reports and elsewhere, the cable guys want to lock in all cable network programming. But subsequent reports, and a lack of object from competitors like DIRECTV, make it look more like a cable programming network play and less like an incumbent cable ISP play.

One way or another, I expect this to keep getting interesting over time.

More below . . .

Read More »

Posted in Cable, Tales of the Sausage Factory | Also tagged , , , | 1 Comment (Comments closed)

Tales of the Sausage Factory

Mr. Moffett, I Thought You Said Cable Was Vibrantly Competitive?

In an interesting turn of events, industry analyst Craig Moffett takes a look at the growth of cable broadband and overall subscriber growth, as compared with that of telcos and satellites, and comes to this interesting conclusion: Cable is a natural monopoly in the making — and has been on course to do so since about 2005.

What is interesting to me is this is the same Craig Moffett who, during the fight last year on whether cable penetration had triggerred the 70/70 rule that would enable the FCC to significantly regulate cable by reaching 70% penetration, rushed to Commissioner Adelstein (the swing vote in last year’s fight) to explain that cable penetration remained stuck at 60% and would never reach 70% because of all the amazing competition.

Mind you, we all make bad predictions (I still remember with considerable heartbreak my Great Google Prophecy). But Mr. Moffett has a habit of telling Wall St. what a great investment cable stocks are while telling Washington how wildly competitive the market is, how cable can’t possibly exercise market power, and how in no way shape or form should anyone even think about regulating this market.

With Kevin Martin repeatedly saying he is unlikely to act on a proposal by small cable operators to unbundle expensive cable programming and retransmission rights for broadcast signals at the wholesale level, the coast no doubt looks clear to start explaining why cable is such a great investment and will crush its competition. But I will be curious to see what happens if, for example, Congress holds hearings on the FCC’s decision in the Comcast complaint and asks whether we need to regulate broadband. Will Mr. Moffett stand by his “natural monopoly” analysis — even if he argues for deregulation for other reasons? Or will he suddenly discover new life in FIOS, WiMax, and other potential broadband competitors?

Stay tuned . . . .

Posted in Cable, Tales of the Sausage Factory | Also tagged , , , , , , , , | Comments closed

Tales of the Sausage Factory

What Does Cablevision Want With Newsday? And Should I Care?

For a business supposedly on the edge of extinction, newspapers attract an odd assortment of newcomers eager to get in on the game. Real Estate billionaire Sam Zell bought Tribune last year, marking fresh blood coming into the newspaper and broadcasting biz. Now, as Zell sells off some chunks of Tribune to to pay down debt, it would appear another new player is poised to enter the game.

According to this story, NYC based Cablevision has beat out Rupert Murdoch for the Daily News. Unlike the Murdoch deal, this would not implicate any FCC rules and should not raise too many hackles on the antitrust side. Arguably it has an impact on the local advertising market, but hardly enough to make a difference. Besides, I’m not sure if there is any evidence that the newspaper advertising market and the cable advertising market are related.

What is more interesting is “why does Cablevision want Newsday at all? And should I care?” Cablevision has in the past tried to break out of its main business as a cable operator and dabbler in cable programming and owner of various sports venues and franchises. At various points, it has tried to launch a satellite service and was a bidder in the last two major FCC spectrum auctions (coming away empty handed both times). Is this a toe in the water to go into the newspaper business or a more limited foray?

It is interesting to note that a few years ago, Cablevision was sued by the Jets over an alleged effort to block the Jets from building a sports stadium that would compete with those owned by Cablevision. Among the charges, the Jets claimed that Cablevision routinely gave its own front group free advertising time on its cable systems to drum up support against the Jets’ stadium effort, while refusing to sell advertising time to the Jets for pro-stadium advertising. Owning Newsday will certainly give Cablevision a bit more political clout in its backyard should it find itself wanting to lobby local government again. While I don’t think that’s the primary reason for Cablevision buying Newsday, it does make for an attractive bonus from Cablevision’s perspective.

Unfortunately, I think only DOJ or the FTC will examine the acquisition. It doesn’t trigger either FCC rules or local franchise review. But this sort of impact on the diversity of news sources and the ability to leverage ownership of different media assets for political gain falls outside antitrust review — even in an administration that cares about antitrust. So for better or for worse, barring some new bidder emerging, I expect the deal to sail through easily.

Stay tuned . . . .

Posted in General, Tales of the Sausage Factory | Also tagged , , , | 2 Comments (Comments closed)

Tales of the Sausage Factory

Arise Ye Independent Cable Programers! The FCC Wants To Hear Why The Current Cable Programming Rules Suck Rocks.

Well, it took nearly a year since the FCC committed to reforming the leased access and carriage complaint processes as part of its Adelphia Transaction Order, but the wait proved worth it. On June 15, the FCC released a notice of proposed rulemaking asking all the right questions and opening the door for major changes in two critical but dysfunctional laws designed to break the stranglehold big cable companies have over cable programming: cable commercial leased access (47 U.S.C. 532) and the prohibition on favoring affiliated programming (aka “carriage complaint process”) (47 U.S.C. 536).

Done right, these two laws can usher in a new era of independent programming by giving programmers access to cable systems on fair terms. As you might imagine from the current cable programming universe — in which we get 30 different flavors of HBO (affiliated with time Warner) and however many Comcast-affiliated channels Comcast chooses to carry regardless of how few people actually watch, but you can’t find local programming or programming that competes with Comcast or Time Warner programming — the FCC has done a rather crappy job of implementing these rules since Congress passed the current versions in 1992. Nevertheless, wild-eyed optimist and occassionally successful crusader for lost causes that Iam, I think we have a real opportunity here to make these rules work. All it will take is for the progressives and conservatives who like to whine about how the media is all biased one way or another to get off their patooties and actually file something with the FCC. Then all the progressive and conservative would-be programmers will have their chance to sell their programming directly to audiences rather than negotiating with the likes of Brian Roberts, Sumner Redstone or Rupert Murdoch.

Notice appeared in the Federal Register on July 18, which makes comments due September 4 and reply comments due September 21. For those without calendars, this translates to the day after Labor Day and the day immediately before Yom Kippur. So I confess I begged for and got and extension. Now, comments are due September 11 and reply comments due October 12. The relevant docket number for those of you who file (and you know you all should!) is MB Docket No. 07-42.

So tired of watching crap you hate on cable, and wondering why people can’t get good programming on despite having a gazillion channels? See below . . . .

Read More »

Posted in Cable, Tales of the Sausage Factory | Also tagged , , , , , , | Comments closed

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 . . . .

Read More »

Posted in Cable, Tales of the Sausage Factory | Also tagged , , , , | 2 Comments (Comments closed)

Tales of the Sausage Factory

Did I really see that?

On November 29th, 2005, Washington DC experienced a sighting more fantastic than naturalists finding a flock of ivory billed woodpeckers doing figure eights over the Macy’s Thanksgiving Parade. Kevin Martin, Chairman of the FCC, stated that a previous FCC report “relied on problematic assumptions and presented incorrect and incomplete analysis.” And he said it about a report on the CABLE industry! The people for whom the FCC lies so often that the Government Accounting Office has twice warned Congress “don’t trust the FCC about cable.”

Oh my stars. Just when I think Kevin Martin can’t impress me anymore he goes and tells the world the FCC issued a bad report last time. I just know I’m in for disappointment once he gets around to ownership, but I’ll take the crumbs I can get.

Why am I so giddy over this, especially when I haven’t taken a stand on the actual substance of Martin’s discussion (a la carte cable programming) and I’m not thrilled with the notion of “family friendly” cable progrmaming tiers? See below . . .

Read More »

Posted in General, Tales of the Sausage Factory | Also tagged , , , | 4 Comments (Comments closed)
  • Connect With Us

    Follow Wetmachine on Twitter!

Username
Password

If you do not have an account: Register