Cable Seen Facing Less Regulation Due to BellSouth Deal
Cable firms, subject to much FCC scrutiny, may see less oversight thanks to increased competition from the merger of AT&T and BellSouth, said sources and consultants, who expect that to occur. AT&T’s $67 billion ($89.4 billion with assumed debt) buy of its rival will bolster cable arguments that cable needs less regulation due to competition from new entrants in the pay TV market, observers and industry lawyers told us. After largely sitting out pay TV, BellSouth is set to move faster with IPTV (CD March 6 p5).
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Looser cable controls could fit with FCC Chmn. Martin’s strategy of letting firms, not govt., ensure consumers get the best deal on telecom and TV services, an industry lawyer said. FCC approval of the $17.6 billion Adelphia takeover, which the buyers said will spur spending on new services, may help both industries make the case against stringent oversight, said an industry official who asked not to be identified. Others agreed. NCTA had no comment.
“The more competition there is, the less justification there is for government to get involved,” cable consultant Steve Effros, a former Cable Telecom Assn. pres., said. Of the BellSouth deal’s impact on cable, Effros said: “The theory is if you have a bigger target, it’s easier to do things. I certainly wouldn’t disagree with that. But the problem with that theory in this case is that there is clearly fierce competition.”
The Adelphia deal may be a case in point. The takeover by Comcast and Time Warner seems increasingly likely to be approved by the FCC without significant conditions sought by media activists and rivals such as DirecTV and RCN, said industry sources and analysts. That’s because the bankrupt firm will get new owners and the deal will let Comcast dump its interest in TW cable properties, Precursor CEO Scott Cleland said: “This merger fixes both of those problems.”
Some media activists were skeptical. The Adelphia deal is likely to have a net neutrality condition at least as tough as the one on SBC’s purchase of the old AT&T, said Media Access Project (MAP) Pres. Andrew Schwartzman. Another possible condition is a bar on exclusive sports programming, said MAP Senior Vp Harold Feld. “I'll be very surprised if they do not address the regional sports programming issue in a serious and substantive way,” he said. “There appears to be a heck of a lot more willingness to impose procompetitive conditions” than in previous cable deals, he said.
But Martin isn’t expected to back off his pet causes of cable a la carte and what one telecom lawyer called a “hang up” on indecency. But the so-called 70/70 inquiry Martin has backed that asks whether the FCC can expand authority over cable isn’t likely to mean more rules, Cleland and Effros said: “The purpose behind that 70/70 rule was the assumption that there was not competition, and that simply is not sustainable today.” The Commission is seeking comments on how to measure the percentage of U.S. homes subscribing to cable service with at least 36 channels (CD March 6 p5). If that portion exceeds 70%, the so-called 70/70 rule may take effect.
Congress likely will address some Martin policy goals, including net neutrality and streamlining video franchising, Effros said: “The jawboning [on indecency] will continue. He feels strongly about the issue, and he, just like everybody else, has not really figured out an appropriate way the government can do something without violating the Constitution.”