DBS OPERATORS COMPLAIN CABLE IS EVADING LAW ON PROGRAM ACCESS
Depending on whether you're DBS operator or cable operator, 1998 Satellite Home Viewer Improvement Act (SHVIA) is seen as either utter failure or resounding success in getting cable to share its TV programs with competitors. While NCTA insists competition has more than taken hold in multichannel video program distribution (MVPD) market (CD July 30 p8), DirecTV disagrees. In comments to FCC on status of competition in MVPD market, DirecTV said ability of DBS operators to compete with cable continued to be threatened by 3 regulatory issues: (1) “The failure” of Commission to address harmful interference from new service providers seeking to share frequency band. (2) Increased regulatory demands on DBS capacity. (3) “Evasion” of program access law designed to prevent vertically integrated cable companies from engaging in “anticompetitive” behavior. Under SHVIA, vertically integrated cable operators were told to make programming they produced available to competitors. But DBS operators say SHVIA doesn’t address so-called “terrestrial loophole,” which allows cable companies to deliver such programming terrestrially and, as consequence, avoid giving that programming to competitors. Although FCC recently voted to extend prohibition on exclusive programming contracts for another 5 years (CD June 14 p6), that ban doesn’t extend to terrestrially distributed programming.
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Unlike DirecTV, Comcast said SHVIA had “been a huge success in empowering DBS providers to compete aggressively.” DirecTV told FCC that if agency wanted to see real competition in MVPD marketplace, it should approve its proposed acquisition by EchoStar. DirecTV said its ability to compete would be hampered in long run if it had to remain “as a standalone company.” It said proposed deal would eliminate capacity constraints and “enable DBS to compete more aggressively with the cable incumbents.” Allowing 2 companies to combine, DirecTV said, would allow joint company to offer local channel service in every designated market area (DMA) in country, as well as expanded offerings. “Approval of the merger will be the single most important factor in fostering stronger competition to the cable incumbents,” it said.
Comcast, which wants to merge with AT&T Broadband, said it believed there already was robust competition and abundant video programming choice for consumers, citing DBS and overbuilders such as Knology, RCN Corp., WideOpenWest. “Consumers in virtually every corner of the nation have real choices among multiple providers of MVPD services,” Comcast said. Comcast also credited cable industry with widespread availability of broadband. “No other industry can claim to have made so important a contribution to the widespread availability of high-speed Interest services to American homes,” it said. Cable companies, Comcast said, “offer the best remaining hope” for telephony competition.
AT&T Corp., which is other half of proposed merger with Comcast, told FCC that it “must accept” directive from U.S. Appeals Court, D.C., in Time Warner v. FCC that agency consider more than static market share figures in its assessment of marketplace competition. Instead, Commission should focus on “availability” of competitive alternatives, AT&T said. Company said broadcasters and broadband service providers also were providing competition and should be considered in mix. Commission should “reassess its conclusions” about level of vertical integration in cable industry, AT&T said. It disputed FCC finding that there was no reduction in level of vertical integration in industry last year. AT&T said spin-off of Liberty Media constituted “a significant reduction” that would bring level down to 22%, rather than 31% as Commission had said.
Broadband Service Providers Assn. (BSPA) said its members had encountered “significant barriers to widespread competition” in market for delivery of bundled services, including video programming. “The anticompetitive practices of incumbent cable operators loom as the largest obstacle to BSPA members’ provision of competitive video programming delivery,” it said. Those barriers along with limited capital markets and “recession” of telecom industry have caused many BSPA members to significantly curtail their investment and growth plans, assn. said. BSPA said when one of its members tried to enter market, incumbent cable operator would offer “secret and discriminatory” cut-rate deals that BSPA members “strongly suspect are below cost and predatory, in order to drive [broadband service providers] from the market.” Incumbent cable operators also continue to control essential video programming service, BSPA said. “By migrating to terrestrial-based distribution, cable-affiliated regional programmers have avoided application of the program access rules and can refuse to deal with competitors,” it said. To extent Commission believes its hands are tied by Sec. 628 of Communications Act, it should advise Congress of need to amend Act “in order to curb this anticompetitive conduct,” BSPA said. It also cited exclusive long-term contracts between cable operators and multidwelling (MDU) owners as barrier to entry, as well as cable moves to preclude competitors’ access to installation contractors and digital set-top boxes.
National Rural Telecom Coop (NRTC) asked FCC to get more accurate count of homes passed by cable, saying it believed tens of millions of homes don’t have access to cable and must rely on satellite. NRTC urged Commission to deny EchoStar takeover of DirecTV, saying it would give larger company monopoly in rural areas and would be “disastrous” for MVPD market. Comments to FCC were due July 29, replies Aug. 30.