Why Did AT&T Get Left Off The Cable Investigation List — A Very Boring Answer.

While killing time waiting for the Nov 4 meeting to start FCC Chair Kevin Martin discussed the recently opened investigation into cable pricing. To the surprise of those who conceive of Martin as simply having a “vendetta” against cable, the list of companies getting notices about the investigation included Verizon. OTOH, it did not include AT&T. Needless to say, the “Martin can do no good because he is EEEEVVVVVIIIIIIIIIIILLLLLL!!!!!!!!!!!” crowd hit on this as proof that Martin is merely doing the bidding of his telco masters (Verizon having been added to the investigation merely for protective coloring).

Well, I’ve given my views on Kevin Martin repeatedly. As I have said time and again, I may disagree with him a lot, but I don’t think he is an industry shill. He does what he thinks is right and the devil with the consequences. While this has its disadvantages, notably his managing to piss off the other four Commissioners and thus secure for himself a series of policy set backs and rack up a record of number of votes actually lost by the Chairman, it does mean I tend to look for an explanation that goes beyond “Martin is a bastard 24/7 and therefore this is part of an evil plot.”

Here, I think the non-AT&T conspiracy theory answer is fairly straightforward. It has to do with the particular practice the FCC is investigating — forcing customers to migrate to digital. As AT&T does not seem to be behaving in the same way as the named cable operators that got letters from the Enforcement Bureau, they are not being investigated.

OTOH, even if the FCC does find evidence of deceptive advertising practices or anticompetitive conduct, it may lack authority to act.

Thoughts below . . . .

This isn’t an investigation of cable prices generally (the FCC does that annually in its Annual Cable Price Survey Report). It is looking at a very specific practice. Allow me to quote at length from the AP article, as the details are fairly important here:

The FCC wrote to Verizon and 11 cable companies last month about their practice of moving analog channels into digital tiers to free up bandwidth for other uses, such as high-definition channels.

To watch channels that have been moved, subscribers to analog service must either subscribe to a more expensive digital tier, rent a digital set-top box or use an adapter, which service providers are starting to offer for free.

[snip]

The agency also will investigate whether providers are misleading customers into thinking that when analog television channels move to the digital tier of service the shift is related to the federal government’s mandate that all broadcasts be digital by February, Martin said.

The two moves are unrelated. Linking the two in customers’ minds could prompt more people to opt for digital video services.

The FCC has asked companies being probed to submit information about their pricing and channel switching practices within two weeks.

Martin said it also appears consumers weren’t given “appropriate notice” about the channel changes.

He said the FCC has received a “significant” number of consumer complaints about the practice of moving analog channels to digital tiers of service, which has accelerated this year.

So what we have is the FCC responding to a raft of complaints involving specific companies. Absent evidence that folks filed complaints about AT&T (and I’m doubtful, given it’s fairly low subscriber penetration), or Qwest, or Wide Open West, or any of the other companies that didn’t get letters, the obvious conclusion is that the reason the FCC investigated mostly incumbent cable companies and Verizon and didn’t investigate AT&T is because no one complained about AT&T pulling this particular stunt.

Mind you, given how deregulated cable is, it is unclear what authority the FCC will have to remedy the situation. The FCC does have regulations requiring cable operators give subscribers reasonable notice about change, but the usual remedy is to require them to go back, give the appropriate notice, and then make whatever change they want. For the FCC to get the cable guys on deceptive advertising (pretending that you need digital cable because of the digital conversion) or for anticompetitive practices (shifting non-affiliated programming to digital first), it will need to find new authority. Candidates include Section 616 of the Communications Act (47 U.S.C. 536) and the FCC’s general ancillary authority.

Section 616 prohibits cable operators from favoring its own affiliates or forcing certain concessions (such as exclusivity or an equity stake) from independent programmers as a condition of carriage. While the FCC usually relies on programmer complaints, there is nothing in the statutory language that prevents the FCC from conducting its own investigation and taking appropriate measures.

Another possibility is the FCC’s general “ancillary” authority. Most folks will remember this primarily from the Comcast/BitTorrent fight, but it is a doctrine that goes back to the original regulation of cable. In this case, the FCC would use its general authority under Section 201 (47 U.S.C. 201) to prohibit “unjust and unreasonable” pricing or practices. Yes, the statute by its terms applies only to common carriers, and the FCC is generally barred from cable price regulation by Section 623 (47 U.S.C. 543). But the Sixth Circuit upheld the FCC’s authority to regulate local franchise authority in part based on the broad grant of authority in Section 201. It is not much of a stretch to argue that there is a difference between explicit rate regulation barred by Section 623 and ensuring that rates and practices are “just and reasonable” as required by Section 201.

I suspect there are other statutory provisions that could provide a basis for authority, depending on what the Enforcement Bureau actually finds. But that is getting a bit ahead of things. For now, I think we can simply let the investigation proceed based on consumer complaints to the appropriate federal agency asking if any laws were broken. It may be that while the behavior stinks, it doesn’t violate the law. That would toss the matter back to Congress, which may want to reconsider whether the deregulatory experiment of the Telecom Act of 1996 worked out so well after all. Or it may be that the FCC finds that everything was above board and perfectly reasonable as cable companies migrate from analog to digital systems.

For the Martin-haters, I will ask again: what would you have him do with the complaints? As I have said before, forcing cable companies to obey the law is not a “vendetta”, however much they got a free ride in the past. I also prefer to push people to do the right policy thing, whatever their “real” motivation. The cable guys and Verizon deserve a fair process, just as the consumers who filed complaints deserve to see the FCC act on those complaints in a timely manner.

If the law, in its majestic equality, forbids both rich and poor from sleeping under bridges, then we should damn well prosecute rich people when we find them sleeping under bridges and make sure they do time. If consumers complain and the FCC finds real evidence of a violation of law, then it should take action — not wait until someone files a complaint against AT&T.

Stay tuned . . . .

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