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FCC Releases Text of Program Access Order
and New Notice of Proposed Rulemaking
Order extends ban on
exclusive cable programming contracts; NPRM addresses tying
arrangements and other program-access issues
By Burt
Braverman, John
Seiver and Chris
Fedeli
[October 2007]
On Oct.1, 2007, the FCC released the text of the Report and
Order (“Order”) and Notice of Proposed Rulemaking
(NPRM) adopted at its Sept. 11 meeting (see our previous
advisory) addressing the issue of whether existing program-access
regulations should be allowed to “sunset,” or be
extended and revised. The Order extends the existing ban on
exclusive programming agreements for five years to Oct. 5, 2012,
and modifies the current program-access complaint procedures,
giving complainants greater access to program networks’
distribution agreements and the opportunity to resolve disputes
through commercial arbitration.
The Commission rejected proposals to extend the exclusivity
ban to terrestrially delivered programming of cable-affiliated
networks, and declined to adopt rules to expedite the resolution
of program-access complaints. The NPRM seeks comment on additional
program-access issues, including expansion of the exclusivity
ban to both terrestrially delivered programming of cable-affiliated
networks and satellite-delivered programming of DBS-affiliated
networks. The NPRM also initiates what is certain to be a controversial
inquiry into whether the Commission should prohibit broadcasters
from using their retransmission consent leverage to force carriage
of affiliated broadcast stations or affiliated non-broadcast
networks, and prohibit cable-affiliated networks from tying
carriage of supposedly undesired cable networks to carriage
of “marquee” program networks.
The FCC’s Order
Exclusivity ban extended
The “program-access rules,” as adopted by the FCC
in 1992, were based on Congress’ belief that cable’s
horizontal concentration and vertical control over program networks
were inhibiting competition by existing and potential competitors,
such as direct broadcast satellite (DBS), satellite master antenna
television (SMATV) and multichannel multipoint distribution
service (MMDS) operators. The rules were intended to encourage
entry into the multichannel video programming distribution (MVPD)
market by making available to competitors programming thought
necessary for them to become competitively viable. In accordance
with Section 628 of the 1992 Cable Act, the rules broadly prohibited
exclusive program contracts between cable networks wholly or
partly owned by cable operators and cable operators’ systems.
The ban on exclusivity originally was set to sunset on Oct.
5, 2002, but was extended by the FCC to 2007. In the Order just
released, the FCC again has extended the ban on exclusive programming
contracts for an additional five-year period, through Oct. 5,
2012. The Commission based this action on its belief that there
still are “no good substitutes” for some of the
most popular satellite-delivered, vertically integrated cable
programming networks, and on what it viewed as “specific
factual evidence” that, where the exclusivity prohibition
does not apply, vertically integrated programmers have withheld
programming from competitive MVPDs. Notwithstanding the growth
of substantial competition in the distribution of video programming,
the Commission concluded that vertically integrated program
suppliers retain both the ability and the incentive to favor
affiliated cable operators over non-affiliated MVPDs, and that
the ban on exclusivity “continues to be necessary to preserve
and protect competition and diversity in the distribution of
video programming.” In taking this action, the FCC rejected
claims by the National Cable & Telecommunications Association
(NCTA) and by major multiple service operators (MSOs) that a
further extension of the exclusivity ban would violate cable
operators’ First Amendment rights.
The Commission considered and rejected proposals that it should
narrow the scope of the exclusive programming ban by: (i) exempting
new or less popular programming networks, (ii) exempting smaller
cable operators or those subject to effective competition, or
(iii) precluding certain competitive MVPDs, such as overbuilders
or incumbent local exchange carriers (ILECs), from benefiting
from the ban on exclusive program contracts. The Commission
also rejected proposals to expand the exclusive programming
ban to cover programming not owned by cable operators or program
networks that are affiliated with non-cable MVPDs (e.g., DBS
operators), and reaffirmed its prior holding that the exclusive
contract prohibition of Section 628 (c)(2)(D) does not apply
to programming delivered terrestrially instead of by satellite.
The Commission said it would again review the exclusive contract
prohibition in 2011 to determine whether it should then be allowed
to sunset or be further extended.
New complaint procedures
The FCC’s program-access complaint rules previously had
no provision for discovery of network contracts or other documents
unless ordered specifically by the Commission. The new rules
will require respondents to program-access complaints to produce
documents that they expressly rely on in their defense at the
time of filing an answer, and thereafter to produce all relevant
documents in their control that are requested by the complainant
or ordered by the FCC. Such documents will be subject to confidentiality
orders forbidding such materials from being shown to employees
of the complainant who are in a position to use the confidential
information for competitive or business purposes. Parties also
are permitted to pursue voluntary alternative dispute resolution,
including commercial arbitration, during which time Commission
action on the complaint will be suspended.
The FCC reaffirmed its goals of resolving program-access complaints
within five months of the submission of a complaint for denial
of programming, and within nine months for all other program-access
complaints (e.g., price discrimination cases). However, the
FCC rejected various specific proposals to expedite the handling
of program-access complaints, and declined to make arbitration
mandatory.
Notice of Proposed Rulemaking
The FCC also issued a NPRM inviting comment on a number of
program-access issues, including the new issue of whether to
prohibit the tying of “desired programming” with
“undesired programming,” such as that which has
occurred traditionally in the retransmission consent negotiation
process.
Program-access proposals
Although it has twice rejected such proposals, the Commission
again asks for comment on whether competitive MVPDs need access
to all terrestrially delivered cable-affiliated programming
in order to offer a viable video service, and whether it would
be appropriate to extend the Commission’s program-access
rules (including the exclusivity ban) to such programming. The
FCC also asks for information concerning whether cable operators
are shifting programming from satellite delivery to terrestrial
delivery for the purpose of evading the program-access rules.
In addition, the NPRM requests comment on whether the FCC should
(or even has the authority) to extend the exclusive contract
prohibition to programming that is affiliated with non-cable
MVPDs such as DBS operators.
The Commission also seeks comment on whether it can establish
a procedure that would shorten the term of the five-year extension
of the exclusive contract prohibition if, after two years (i.e.,
Oct. 5, 2009), a cable operator can show competition from new-entrant
MVPDs has reached a certain level in a designated market area.
Finally, the NPRM seeks comment on whether, and if so how,
it should address additional program-access concerns raised
by small and rural MVPDs regarding allegedly onerous and unreasonable
conditions imposed by some programmers for access to their content.
Program-access complaint procedures
The FCC requests comment concerning several possible amendments
to its program-access complaint procedures, including (i) whether
to allow complainants to seek a temporary stay of any proposed
changes to an existing programming contract that is the subject
of a complaint pending resolution of the complaint, and (ii)
whether, as part of the remedy phase of the complaint resolution
process, to require parties to submit to the Commission, when
requested, their best “final offer” proposals for
the rates, terms and conditions under review.
Programming tying arrangements
Venturing into highly controversial territory, and citing alleged
“problems associated with programming tying arrangements”
both in the cable network and broadcast retransmission consent
contexts, the NPRM seeks comment on whether the Commission should
prohibit arrangements that tie desired programming to undesired
programming.
- First, the Commission asks for comment on how retransmission
consent negotiations are impacted when broadcasters tie carriage
of their broadcast signals to carriage of other owned or affiliated
broadcast stations in the same or a distant market, or to
one or more affiliated non-broadcast networks, and whether
that practice should be prohibited.
- Second, the FCC asks whether Section 628(b) requires satellite
cable programmers to offer each of their programming services
on a stand-alone basis to all MVPDs at reasonable rates, term
and conditions.
- Third, the Commission inquires whether it should require
terrestrially delivered cable programming networks, and programming
networks affiliated with neither a cable operator nor a broadcaster
(e.g., one affiliated with a DBS operator), to be offered
on a stand-alone basis to all MVPDs at reasonable rates, terms
and conditions.
While the FCC did not explicitly pre-judge any of these issues
in its NPRM, its statements—regarding whether it has the
jurisdiction to prohibit retransmission consent tying, in light
of Congressional legislative history that the Commission says
appears to contemplate and permit the practice; whether the
FCC’s prior precedent in favor of retransmission consent
tying precludes it from reversing course now; whether a prohibition
of retransmission consent tying fails First Amendment scrutiny;
and its statement that broadcast tying is “presumptively
… consistent with competitive marketplace considerations
and the good faith negotiation requirement”—seem
to reflect a strong predisposition to not
prohibit tying that arises from retransmission consent negotiations.
In contrast, the Commission’s statements regarding the
supposed tying practices of cable-affiliated program networks
suggests a much more hostile agency attitude and a very different
outcome.
The statements of the FCC commissioners accompanying the Order
are predictable and not particularly noteworthy, with two exceptions.
Chairman Kevin Martin’s statement references the supposed
interest of consumers in not being required to purchase channels
that they do not want. While uttered in reference to the Commission’s
request for comments regarding the wholesale tying of programming,
this statement suggests that the chairman may use this rulemaking
to build a case for requiring a la
carte retail distribution of programming by cable operators,
a goal that he has pursued zealously since shortly after he
assumed FCC chairmanship. Reflecting a different view toward
the FCC’s anti-tying proposals—one that no other
commissioner expressed—Commissioner Robert McDowell, the
most junior of the commissioners, questioned the Commission’s
“[v]enturing into what has long been squarely within the
realm of the private sector.”
Petitions for reconsideration of the FCC’s Order are
due Nov. 5, 2007. Petitions for judicial review of the Order
are due Dec. 3, 2007. Comments regarding the Commission’s
NPRM will be due to be filed 30 days after publication of the
NPRM in the Federal Register, which has not yet occurred. Davis
Wright Tremaine will be filing comments in this proceeding for
its clients. Please let us know if you would like further information
regarding the Order and NPRM, and if you would like to participate
in comments that we will be filing with the FCC.
For more information, please contact:
Burt
Braverman, Washington, D.C., (202) 973-4200, burtbraverman@dwt.com
John
Seiver, Washington, D.C., (202) 973-4200, johnseiver@dwt.com
Robert
Corn-Revere, Washington, D.C., (202) 973-4200, bobcornrevere@dwt.com
Maria
Browne, Washington, D.C., (202) 973-4200, mariabrowne@dwt.com
James
Tomlinson, Washington, D.C., (202) 973-4200, jimtomlinson@dwt.com
Chris
Fedeli, Washington, D.C., (202) 973-4200, chrisfedeli@dwt.com
This advisory is a publication of the Communications Group of
Davis Wright Tremaine LLP. Our purpose in publishing this advisory
is to inform our clients and friends of recent developments
in the communications industry. It is not intended, nor should
it be used, as a substitute for specific legal advice as legal
counsel may be given only in response to inquiries regarding
particular situations.
Copyright
© 2007, Davis Wright Tremaine LLP.
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