McSlarrow Says Franchise Reform Coming; Family Tier Expected

Passage of a federal bill streamlining local franchising is improbable this year or next, as telecom rewrite efforts have stalled on Capitol Hill, said McSlarrow, but it will come later. “I believe you're going to see some kind of reform about video franchising,” said McSlarrow. “Movement of any legislation has fallen so short that many observers are dubious things are even going to pass next year.” On the other hand, he said he’s not discounting the efforts of House Commerce Committee Chmn. Barton (R-Tex.) and his counterpart in the Senate, Sen. Stevens (R-Alaska): “You have two very capable legislators, and when they are focused on a goal, I don’t count them out.” Cable might yet see some benefit from legislation. “Who isn’t going to say we couldn’t use a little streamlining?” he asked. “We want to make sure whatever the shape is it is, number one, deregulatory.”

Meanwhile, NCTA has stepped up efforts on state proposals, as N.J. lawmakers are considering a franchise bill that may benefit Verizon (CD Dec 5 p12). A similar measure became law in Tex. this year. “I think we were a little bit slow off the mark” in Tex., McSlarrow said in response to a question. Prospects are low for passage of similar legislation in N.J. this year, said McSlarrow: “I think it rolls over into next year.” He said a dozen or more additional states may consider franchise reform, and NCTA will “be fully engaged. I am assembling a team in each of these states.”

Telecom reaction to McSlarrow’s remarks was mixed. “The good news for consumers is that the cable industry at last is publicly conceding that competition in the TV and entertainment business is inevitable,” said an AT&T spokesman. “The cable industry telegraphed their strategy for the coming year: Delay cable franchise reforms for another year,” he said. Congress will pass “video choice” legislation next year, said Peter Davidson, Verizon senior vp, in a statement responding to McSlarrow’s remarks. That company started sales of its FiOS fiber TV product Sept. 22 in Keller, Tex. “Every time it came to a vote, video choice passed easily,” said Davidson. Cable’s stalling isn’t necessarily behind the delay in rewriting the Telecom Act, said analysts. “The scenario is, broad telecom legislation would be an uphill battle,” said Stanford Washington Research Group’s Paul Gallant, a former FCC 8th-floor staffer. “It’s always possible that something narrow could get done… At this point, I would say it seems like franchise reform is wrapped up with other difficult policy issues” such as Internet neutrality and municipal Wi-Fi projects, he said.

The FCC’s hands-off approach to regulating Internet neutrality is the right tack, McSlarrow said in the wide ranging remarks. Anyone seeking govt. intervention in Internet issues is sure eventually to be disappointed -- because when “the government comes into something… they never leave,” he said. A first step toward coherent net neutrality is a set of shared definitions, said McSlarrow. “I think this isn’t something that’s going to [be] rushed through any time soon,” he said of regulation. About a month after cable modem service was effectively deregulated by the Supreme Court’s Brand X ruling, the FCC reduced regulation of wireline Internet access services including DSL. At the same time, the Commission said it supported network neutrality, which had been sought by some high-tech firms (CD Aug 8 p1). McSlarrow lauded the FCC’s approach: “What the FCC said in their order is they're going to monitor this… so the attention then shifts to Congress.”

McSlarrow said municipal Wi-Fi buildouts may offer business opportunities for cable operators to carry some traffic on their own networks. “It’s actually an opportunity; I may be in the minority on this,” he said, adding that he still doesn’t think such policies are needed. “As long as providers get a chance to bid, I don’t see how I can complain about that.” Some telecom firms have opposed city funded Wi-Fi projects, saying govt. won’t be able to handle customer service and other operating problems.

Possible Family Tier Plans

The cable industry may announce a plan for a family tier Mon. at a Senate Commerce Committee forum that will also revisit discussion of a uniform rating system, said some lobbyists. “I think the companies are taking a fresh look at this as to whether there are some other options out there,” said a Senate Commerce staff aide. “The industry is taking some steps,” she said, but there isn’t a firm commitment yet. “Discussions are still ongoing.” Cable’s offer of a family tier could pre-empt legislation regulating cable and satellite content. NCTA declined to comment on the family tier speculation. McSlarrow will “update the committee on industry initiatives,” said a spokesman. But McSlarrow’s statement isn’t prepared yet, he said.

Parents TV Council (PTC) called on Stevens to stiffen penalties for indecent broadcast network programming. The group also renewed calls for a la carte. “Cable must be restructured and should accept an ‘a la carte formulation,'” said a PTC letter to Stevens. “It is simply not enough to give consumers tools to block offensive programming from their homes.” But PTC has never sought the expansion of broadcast decency regulations to pay TV including cable, as Stevens has sought, said Dan Isett, the group’s dir.-corporate & govt. affairs. “The best way to deal with that problem is with [a la carte], and that’s to let parents and families make up their own mind,” he said.

McSlarrow is scheduled to speak at next week’s committee forum, along with former MPAA Pres. Jack Valenti, who will discuss the industry’s ratings system. Martin isn’t expected to appear, as he did at last week’s forum, said the committee aide. “That means he isn’t finished with his rewrite” of the a la carte report that is under way, said a cable industry lobbyist. Martin disagreed with the 2004 report’s findings, which said such a tier would be economically unfeasible. He told the committee its findings were based on faulty economic assumptions (CD Nov 30 p1).

The industry is unlikely to be forced to sell cable channels individually, despite the desires of some legislators and FCC Chmn. Martin. “I really think there is no stomach for mandates on Capitol Hill,” said McSlarrow. “The right answer is programmers and distributors have to negotiate those things out… They are doing it right now.”