Powell Sees Signs From FCC, Hill and Industry that USF Will Be Reformed

The agency ought to examine retransmission consent deals between subscription-video providers and TV stations, as it’s doing, Powell said. With the owners of three of the four top broadcast networks NCTA members, Powell noted broadcasting isn’t completely a free market. He said the association’s members, which include cable operators and programmers, are working on ways to keep programming prices down, as consumers have been hurt by the economic slowdown. NCTA members have said Powell, on the job almost six months, must bridge the gaps between members on issues including retrans and cable a la carte (CD March 16 p6).

Staying true to its word, NCTA won’t file any lawsuit against the FCC over the net neutrality rules approved in December and taking effect next month, Powell said. “We made a deal and we're sticking to it,” he said. “We worked in partnership with the commission and the chairman to get to something we think we all can live with.” Under Kyle McSlarrow, now at Comcast and its NBC Universal, the association met with net neutrality foes and advocates to work out a compromise of sorts last year. Verizon is among those suing over the rules. Powell knows of no NCTA members considering a suit, after it didn’t stand in the rules’ way, he said: “That’s kind of a big give in the world of cable, and some people probably think we should just go at it."

Next week’s Senate Commerce Committee hearing on USF reform shows legislators like Chairman Jay Rockefeller, D-W.Va., want to learn more about the issue, rather than meddle with what the FCC is doing, Powell said. “It would probably be a little unusual if the Hill didn’t exercise its prerogative in some way,” and of the hearing, “a lot of it is probably education for the Hill, which I think is important,” he continued. “We've been very pleased with the reception” on the Hill to USF reform, even from members “from very rural places, who have the most to protect,” he said: “I think there is a more balanced view of this” in Congress than in the past, “even among those who are going to fight to the end for the most for their communities."

"I've seen many a chairman break their pick on universal service reform,” and Genachowski hasn’t offered many details on his draft order, but the variables at play seem aligned for reform to happen now, Powell said. “The distortions have become so bad, everyone knows the status quo no longer” works for USF and “this stuff has got to get fixed,” he said. “I know the next three weeks for them are going to be challenging” at the Portals, Powell added. But he said from the low number of “screaming” letters from legislators asking the agency to hold off, “I think the commission has been given permission this time” to do reform the right way. “While you'll see a battle of how things come out, I don’t think you'll see a broadside” from any quarters among USF stakeholders on what the commission is doing, Powell said. “The industry has really gotten aligned” on the need for USF to change, he said of all stakeholders.

There’s no “concrete effort” afoot among NCTA members to try to get rules requiring cable channels be sold individually that Powell’s aware of, he said. “We have an industry that is rightfully growing concerned about the effects of the recession on the consumers” and about rising costs, he said of cable operators and programmers. “Both sides have an understanding of that risk” with consideration of different channel packaging options (CD Oct 7 p9) “going on in very general terms” and with companies like Comcast and Time Warner Cable seeking “to create more affordability in the way content is sold,” Powell said. There’s “frustration” among cable operators that have lost video subscribers recently, he said. “My own view is I think it’s a good conversation” programmers and distributors are having about video’s affordability, he said: “Bottom line is none of them thrive or profit if people get rid of the service."

Although broadcast retrans deals aren’t a top priority of the Genachowski FCC, “I do think there are issues that the commission should examine, and they should not just treat that proceeding as over or dismissed,” Powell said. “It’s a free market influenced by all kinds of government benefits that make it less free than some would suggest. If you want to be a cable programmer, come on in, the water’s just fine, but live by the rules others have to live with on rates and fees,” he continued. Celebrated as a free service, broadcasting “comes with lots of benefits and some burdens,” he added: “But you have to take a deep breath” before “you say it’s a completely free market, as NAB would say.” An NAB spokesman declined to comment.

Powell used his opening remarks Friday to talk about some of what cable wants from USF reform, which in some cases differs from the ILEC-backed ABC plan. NCTA wants competitive auctions so that any company can bid for USF money in an area that’s deemed unserved, and for different types of phone traffic such as VoIP and time division multiplex format to be treated similarly. Cable operators visited the FCC last week to make their case. (See separate report in this issue.) Cable’s “principles” seem well understood on the eighth floor, at least at the “50,000-foot level,” Powell said. A spokeswoman for USTelecom, which helped broker the ABC plan, declined to comment.

Powell finds it “a little bit cheeky that areas that have gone unserved for decades … are suddenly an imperative” for phone companies that hadn’t served them and want USF money, he said. Of the commission’s current efforts, he noted that USF is “a big, integrated program, and maybe some of the parts of it are being delayed.” The FCC isn’t now “dealing with contributions,” and “maybe those will be harder,” Powell said. “I suspect there won’t be another big reform effort for another decade” because “it’s difficult to do and complex” and companies “build their business models” based on the rules, he said. “Everybody somewhat knows … that they're not going to get everything that they want.”