FCC Haggles Over Cable's DTV Must-Carry Terms

The FCC voted unanimously last night (albeit with some dissent, and after much haggling) to renew program access rules for five years, require cable operators make must-carry TV stations’ digital signals viewable to all their customers, analog and digital, after the DTV deadline, and also laid the groundwork for a measure to prevent programmers from bundling networks in broadcast agreements.

The commission approved the measures impacting the cable industry at its open commission meeting — which was delayed more than 11 hours due to last-minute haggling over the tougher cable provisions that FCC chairman Kevin Martin had wanted to push through, but was forced to compromise by the time the Commission (finally) sat down to vote.

In a move designed to not penalize cable subscribers who still have analog TVs after the the digital TV transition deadline of Feb. 17, 2009, the FCC last night ruled that cable operators must transmit broadcasters’ local digital and analog TV signals for a three-year period starting the next day (Feb. 18) and not charge broadcasters for carrying those signals. All-digital cable systems are exempt from the requirement to carry analog signals.

The three-year sunset clause was a win for the National Cable and Telecommunications Association, the cable industry’s lobbying arm on the Hill, which fought Martin’s initial proposal that operators carry a must-carry station’s analog and digital signals until a system is all-digital. The NCTA pushed for the three-year limit as a compromise on digital must-carry, although the FCC reserved the right to extend the three-year sunset clause.

"We are pleased that the FCC’s action today adopts cable’s carriage plan," NCTA president and CEO Kyle McSlarrow said in a statement. "And we are pleased that the FCC dropped an ill-considered mandate that would have turned back the clock on decades of digital technology innovation.  We continue to urge the FCC to act quickly to take into account the special circumstances of very small systems, and to make clear that those systems have the flexibility to serve all their customers without a one-size fits all mandate."

Smaller cable operators were hoping to be exempt from the ruling altogether; instead, the FCC will allow cable operators with systems of 552 MHz or less to apply for hardship waivers from the rule. That wasn’t good enough for the American Cable Association, which lobbies the FCC on behalf of its small, rural operator members. The ACA this morning released a statement slamming the FCC’s ruling as "burdensome" for small operators.

"The new carriage obligations now make it more difficult for operators of small systems to stay in business," ACA president and CEO Matt Polka stated. "If forced to comply with this order, small operators will have less capital to invest in broadband because they need to purchase costly equipment to provide the same must carry channels in more than one format. Some very small systems will have no choice but to shut down because their small subscriber bases cannot support the costly equipment mandated by this order."

"While the order allows cable operators with systems of 552 MHz or less to apply for an exemption from the carriage requirements, this offers little meaningful relief, requiring these systems to engage in, and pay for, yet another process at the FCC, with the outcome far from certain," he added.

Cable operators also won a reprieve from carrying "all content bits" in a broadcaster’s digital TV signal, freeing them to employ their preferred bandwidth management technology such as switched digital video and not be hampered by signal compression and statistical multiplexing.

The FCC last night also issued a notice of proposed rule making that would prevent TV programmers from bundling popular channels with less popular networks when negotiating broadcast agreements with cable operators. Critics see that as a pre-emptive strike by FCC chairman Kevin Martin to eliminate cable operators’ argument that a la carte will cost more because programmers bundle and discount networks.

The commissioners also voted to extend (from Oct. 5, 2007 to Oct. 5, 2012) program access rules that compel companies which own TV content and distribution of content to offer other distributors (such as DirecTV, EchoStar and other cable operators) access to their programming, a move that impacts bigger operators including Comcast and Time Warner Cable. The Commission also voted to toughen its program access complaint procedures.

EchoStar said in a statement it "commends the FCC for extending the program access rules and putting some teeth into the discovery process; stronger enforcement benefits competition, consumers, and video choice."

In other business, the FCC also voted to force cell phone companies (including cable operators that offer wireless phone service) to employ stricter geographic standards when testing the ability of rescue workers to locate E-911 callers in distress.

In a Q&A with reporters before the meeting, Martin said the FCC is looking at limiting early-cancellation fees that telephone and cable companies charge subscribers who cancel before their contracts expire, extending its examination of early-termination fees from wireless phone service to landline phone, Internet and cable TV contracts.

Details, including dissenting opinions, on last night’s individual FCC actions are posted at FCC.gov.