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 . . . .

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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

The Value of Diversity, Or, Lessons of a Canadian Folksinger to the US Supreme Court.

The Surpreme Court has now ruled by 5-4 that school districts cannot use race as a means of determining placement to maintain integrated class rooms. Unsurprisingly, the four of the Court’s “Conservative” wing (Scalia, Thomas, Roberts, and Alito) believe that any race conscious consideration by government is intrinsically harmful and would overturn the 2003 decision in Grutter v. Bollinger that upheld the use of race as one of several factors to promote diversity in higher education. (Technically, Roberts only goes so far as narrowing Grutter‘s holding to higher education, but it amounts to the same thing.) Kennedy, the eternal swing vote, still affirms that diversity (including racial and gender diversity) is an important value that the government can support, without really indicating how the school systems can do so.

Reflections on the fallacy of “color blindness,” and how a completely unrelated folksong by the Canadian folksinger Heather Dale makes the point about the need for diversity and role models more eloquently than I ever could, below…

Read More »

Posted in General, How Democracy Works, Or Doesn't, Tales of the Sausage Factory | Tagged | 6 Comments (Comments closed)

Tales of the Sausage Factory

Open Access Included in Spectrum Notice! Fish In Trees! Rivers Running Uphill!

Yesterday, I wrote, with regard to whether the FCC’s Further Notice on the 700 MHz Spectrum Auction would include questions on our open access proposal:

I think our chances of moving forward to the next round are pretty close to zero. OTOH, I live from day-to-day in the hope of pleasant surprises.

Apparently, I live another day. And so does the open access proposal. As explained by Gigi Sohn, we live to fight another day.

It was a wild meeting. Pushed back from 9:30 to 10:30, then pushed off again until 6:45 p.m. The contentious issue was, as predicted, license size. Apparently, McDowell teamed with the Ds to make sure the Further Notice requested comment on a mix of licenses and not just the large licenses that Martin wanted.

The Order is not yet out, so I can’t really assess yet what the results are. Heck, they don’t even have all the seperate statements up yet. Here are links to the news release, Chairman Martin’s statement (expressing disappointment over the license size issue), Commissioner Adestein’s statement (with a shout out to the public interest coalition!), and Commissioner McDowell’s statement (which basically says “I know I’m the swing vote, but I need to catch up on the comments because I’ve been out with my new kid”).

But whatever happens, I gotta give a shout out to Martin for being willing to put the open access question out there and have it debated. Yes, all credit to the Ds. But I don’t believe we would be positioned to have the discussion about wireless open access if Martin had been dead set against it.

Off to bed. It’s been a day.

Stay tuned . . . .

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