CABLE INDUSTRY TAKES AIM AT DISNEY, VIACOM IN ITV REPLIES

In most pointed example, Comcast took shots at Disney and Viacom for aggressively pushing nondiscrimination mandates in earlier joint filing for ITV regulations. Calling that submission “particularly troubling,” Comcast said both companies, blessed with huge content holdings, needed no help from FCC to reach favorable programming and service carriage agreements with cable operators. “As pleaders for additional government-bestowed advantages, neither is deserving,” MSO said, later adding that Disney was “especially ill-suited” to seek such advantages: “Nor, in this case at least, is either credible.”

Comcast also accused Disney of flip-flopping on ITV regulation, supporting “tightly focused” nondiscrimination mandates only for AOL Time Warner during that company’s merger review but now seeking broad provisions that would cover entire cable industry. “Astonishingly, Disney provides no explanation for this about-face,” Comcast said. “The pleading is devoid of any clue as to why what it previously called a ’tightly focused,’ merger-specific issue has now suddenly become a concern sufficient to justify regulation of all ‘vertically integrated cable operators.’ The only apparent explanation is that Disney’s desire for government-conferred regulatory leverage in commercial negotiations outweighs considerations of principle or consistency.”

Joined by ITV software developers Microsoft and OpenTV, cable interests argued that proposed nondiscrimination mandates would deter ITV investment, innovation and service deployment. They contended that regulatory proponents couldn’t cite any evidence of actual ITV discrimination or other market misconduct by cable operators. NCTA said: “They provide not a whit of evidence that any such discrimination has actually occurred. Nor do the proponents of regulation provide any economic or antitrust analyses to support their bald assertions that cable operators will engage in such behavior.”

Cable interests also repeated arguments that ITV market was too young, undeveloped and fragile to warrant govt. intervention. They said ITV restrictions would violate First Amendment rights of cable operators and would exceed FCC’s limited statutory authority. “The First Amendment prohibits, and the Communications Act provides no justification for, regulation of ITV,” AT&T said. “In the absence of evidence of anticompetitive conduct by cable operators in the ITV business, the Commission lacks a substantial government interest for regulating cable operators’ editorial discretion.”

Public interest groups countered that cable operators were hiding behind First Amendment to avoid having to open up their systems to rival ITV service providers. In joint reply, Center for Media Education, Consumer Federation of America and Consumers Union said neutral, nondiscrimination requirement “will serve, rather than frustrate, the First Amendment” by fostering “the twin compelling interests” competition and diversity. Noting that “existing laws held constitutional already mandate nondiscrimination,” groups argued that “the First Amendment compels the adoption of a nondiscrimination requirement rather than mandating against it.”

CEA, consumer groups, Gemstar-TV Guide and Paxson challenged cable’s argument that federal law severely limited FCC’s authority over ITV services. They said Commission already had power to act under Communications Act’s provisions on cable set-top boxes and other navigational devices. “CEA believes that the Commission currently has sufficient authority under the Communications Act for the agency to adopt a nondiscrimination policy for ITV services,” CEA said. “Indeed, as CERC [Consumer Electronics Retailers Coalition] points out, cable MVPDs [multichannel video program distributors] already have a statutory obligation to support the competitive availability of any device that is needed to provide their services to their subscribers, an obligation which they are not fulfilling.”

Regulatory proponents also argued that cable operators already had shown propensity for discriminating against outside content and service providers. They cited moves by AOL Time Warner to strip Gemstar-TV Guide’s electronic program guide (EPG) from its cable systems, as well as earlier comments by Cablevision Systems and NCTA that cable operators must have complete control over subscriber selection of ITV content and applications and right to strip ITV triggers of other services. Gemstar-TV Guide said: “The cable operator’s elimination of such triggers from the programming carried on its system would destroy the ability of virtually all non-cable-affiliated ITV providers to compete against cable-controlled content. The cable industry’s insistence on the prerogative to engage in precisely this behavior thus puts the Commission and all entrants into the nascent ITV market on notice: In the absence of Commission action to prevent MVPDs from discriminating against unaffiliated providers of ITV services (including EPGs), MVPD discrimination will be inevitable.”

Regulatory proponents questioned why cable operators were so adamantly opposed to competitive safeguards if they had no intention of discriminating against independent ITV services. They contended that only recent emergence of DBS and 1992 enactment of program access rules had led to cable competition and deployment of new services. “In short, for all the attempts to generate fear, uncertainty and doubt, the Cable commenters have not shown how prohibiting them from doing something harmful they claim they will never do will discourage deployment of ITV,” consumer groups said. “By contrast, history provides a very real warning for what will happen if the Commission fails to impose a nondiscrimination requirement.”

OpenTV, besides opposing regulations, urged FCC to act quickly and decisively, no matter what it decided to do with inquiry. Calling regulatory uncertainty “the enemy of investment,” company asked agency to give “the public the clearest possible statement of its intentions.” EchoStar argued that Commission should tailor whatever rules it adopted to apply only to distributors with market power. “Even in a market where all companies deploy the same technology, not all companies are equally subject to economic regulation of the type discussed here -- only the dominant ones are,” EchoStar said.