Tales of the Sausage Factory

Why Washington Needs To Hear From More Venture Capitalists (and pay less attention to Wall St. Analysts) on Telecom.

Reprinting below a piece I just posted over at the Public Knowledge Policy blog.

More below . . . .

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Tales of the Sausage Factory

Cable Industry Flips Off FCC, Fines To Follow? Expect Other Industries to Tell FCC To [Fleeting Expletive] Off Too.

I clearly missed a class in law school. Not once in my Administrative Law class did my professor ever tell me that you could respond to a federal investigation by telling the agency “We know you have authority, but we’d rather not answer these questions because you are a great big meany.” But then, I’m not working for the cable industry, which has repeatedly shown it has trouble with the concept that federal law really applies to them and that the FCC is supposed to be a regulator not a lap dog.

Today’s episode of “I Can’t Believe The Chutzpah” comes from the ongoing investigation by the FCC over whether cable operators are using the confusion around the DTV conversion to push users into buying digital tier service, and rent new digital set-top boxes in violation of the rules on set-top box interoperability, or just generally violating the law by changing channel line ups without notice to either subscribers or local franchise authorities, migrating stuff off basic tier without warning, or charging for additional tiers to get channels required by law to be available on the basic tier. Mind, I’d also like them to explicitly ask whether the cable guys are unfairly migrating unaffiliated channels to digital in violation of Section 616, but that’s just me.

Anyway, after getting a bunch of consumer complaints and reading Consumers Union’s letter to Congress (or at least hearing about it on NPR), the FCC sent out a bunch of letters of inquiry to the named cable companies and Verizon asking them to provide a boatload of information which would allow the FCC to determine if the consumer complaints were, ya know, true. Given that this is lots of people being potentially ripped off big time, the agency told the everyone that got a letter they had two weeks to reply.

Mind you, this is hardly an original process or unique to the cable industry. I should know. The FCC did the same thing in response to my complaint about the wireless microphone guys back in August. The FCC (also under Martin I should add) acted with similar swiftness and intensity back in 2006, when Verizon and BellSouth tried to keep charging USF fees on DSL after they were phased out. The phone companies, apparently under the same misconception that I was that even if you are a big company you actually have to obey the law, backed off. The cable companies have other ideas. And, if they get away with it, I’m sure the Bells, broadcasters, and every one else will follow suit.

So yesterday, NCTA,the trade industry for the cable guys, sent a lengthy letter to the FCC explaining that the FCC is not allowed to investigate the cable industry. They recommend that the FCC rescind the letters of investigation and, instead of having the Enforcement Bureau actually act on consumer complaints, the FCC should hold a nice, quiet Notice of Inquiry instead. Then, if Martin gets all the other Commissioners to agree, and the FCC asks nicely and without any legal compulsion to answer honestly or completely, cable operators might consider responding.

Now I just know, KNOW that there are people out there who hate Kevin Martin so much that they will decide that it is really O.K. for cable to tell the FCC to “fleeting expletive off and die,” because it is the poor helpless widdle cable guys and the evil Kevin Martin (I cannot help but observe that Verizon does not seem to have any problems complying with this request, but of course they are an evil minion of Kevin Martin, or the other way around. Besides, Kevin Martin hates the cable industry, so there!)

As what is often called a “consumer advocate,” I’m a little alarmed that we will now have a new doctrine that says “consumers can complain, but the FCC can’t protect them if we think the FCC Chair might enjoy it.” And while I would flippin’ think that the idea that the cable companies need to obey the law like everyone else would be bloody self-evident, not to mention that the consequences of letting industry dictate to the federal watchdog agency what it will and won’t respect on enforcement go well beyond the poor picked on widdle cable guys to whatever industry you don’t like (in my case, wireless microphone manufacturers — I can hardly wait for Shure to refuse to cooperate with the FCC next), I long ago learned that even bloody obvious things need explaining when it comes to the cable industry and their rabid defenders.

So I address the actual legal issues below . . . .

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Tales of the Sausage Factory

Sixth Circuit Upholds FCC on LFA Limits: A Bad Decision and A Sad Day for Localism, With Possible Silver Lining for Ancillary Authority and Leased Access.

The Sixth Circuit has denied the Petitions for Review filed by local franchise authorities (LFAs) and PEG programmers challenging the FCC’s December 2006 Order limiting the ability of LFA’s to negotiate with telco video overbuilders. (You can read a copy of the decision here.)

I am rather disappointed with the decision, as readers might imagine. Not only do I think limiting the authority of LFA’s to protect their residents is a phenomenally bad idea, I think the court takes a very expansive view of FCC authority over LFAs given the legislative history and the statute in question.

On the other hand, the decision potentially provides a substantial boost both the FCC’s ancillary authority and to its leased access reform order, currently pending before the Sixth Circuit. While I find this rather cold and uncertain comfort at the moment, it’s the best I can do in the face of what has become an utter rout for LFAs and PEG programmers. God willing, a future FCC will conduct the inquiry into strengthening PEG programming Commissioners Adelstein and Copps have repeatedly urged.

Some further analysis of the decision and what it might mean below…

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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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Posted in Cable, Tales of the Sausage Factory | Also tagged , , , , , , , , , , | 3 Comments (Comments closed)
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