Martin Bid for Leased Access Change Faces Cable Opposition
FCC Chairman Kevin Martin’s effort to change leased- access rules is running into early cable industry opposition. Intensifying his rhetoric against cable, Martin for perhaps the first time said publicly Friday that he wants to cut the rates that cable operators charge to lease channel space to independent programmers. Speaking to the Rainbow/PUSH Coalition, he chastised cable for raising rates and refusing to sell channels piecemeal. Martin urged more video competition (CD Oct 15 p6).
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Any move to cut leased access rates or otherwise change the rules will draw industry fire, judging from reply comments by the NCTA and Time Warner Cable on the FCC leased- access rulemaking notice. Time Warner Cable said leased access programmers haven’t shown that the FCC has authority to cut rates. “As the record in this proceeding makes clear, there are undeniable constitutional, statutory and policy reasons why the Commission is barred from taking such actions,” the company said. “Any downward adjustment to leased access rates would be confiscatory and violate the Takings Clause of the Fifth Amendment.”
The Cable Act bars the FCC from lowering rates, the NCTA’s filing said. The leased access system was set up in 1984 by Congress. NCTA says prices already are highly discounted. The act lets cable operators charge independent programmers an “'average implicit fee,'” the NCTA said. The fee varies widely by system. More discounts are illegal, the group said, citing the act and a 1998 ruling by U.S. Appeals Court in Washington, D.C., on ValueVision International v. FCC. “The Commission should resist the calls to rig commercial leased access to try to artificially induce additional use,” the NCTA said. “Reducing the rate below the ‘average implicit fee’ level will simply subsidize leasing, contrary to Congress’ intent.”
There’s room for more rate cuts, Martin said. “What we need to do is reform and lower leased access rates to allow other people to get on” to cable channels via leasing, he told Rainbow/PUSH, answering a question from the audience. In his speech, he said the whole leasing system may need restructuring. “The Commission should reexamine the cable leased access rules to better encourage independent programmers,” he said. “We are also looking at reforming our leased access and program carriage rules to make it easier for independent voices to get carried on cable.” The NCTA declined to comment on Martin’s speech.
FCC rules let cable operators base charges on what it costs them to carry independent shows and on the “opportunity cost” of forgoing potentially profitable programming, said Media Access Project Senior Vice President Harold Feld. The FCC should cut leasing prices by charging programmers only what it costs to carry a show, that group said. The “implicit” fee formula is complex and gives cable operators plenty of wiggle room to inflate opportunity costs, said Feld. “It is just extraordinarily difficult to try to figure out” the formula, he said. “While it claims to be clear, [it] is in fact extremely vague, because proving what costs do and don’t go into this is extremely difficult.”
Martin’s push for lower leased access rates reflects a sentiment among some at the FCC that video competition is inadequate, said America Channel CEO Doron Gorshein. “My sense is the FCC recognizes that the market is not operating freely and diversely, and the FCC wants to promote competition and diversity,” Gorshein said in an interview. “That’s why I think this proceeding was commenced,” he added, referring to the leased access rulemaking. The same notice sought comment on whether the FCC should change its approach to stalemated program carriage complaints. The Hallmark Channel wants the agency to adopt baseball-style arbitration, with programmers and operators each submitting final terms to an arbitrator who decides which is most fair. HDNet Chairman Mark Cuban supports private arbitration “where the parties agree to such a route,” he said in an FCC filing.
Martin’s leased access stance complements his support for cable a la carte and other rules to boost video competition, said Feld. By supporting leased access, Martin is offering a means other than station ownership by which programmers of color can reach pay-TV subscribers, enhancing his case for an order he hopes soon to circulate on deregulating media ownership. “He’s obviously very sensitive to the issue of whether relaxation of the ownership rules in broadcast will harm minority programming,” said Feld. “He'd like to be known as somebody who was the chairman who took on big cable for the American people.”