FCC Gives Cable Industry Just Enough Rope To Hang Itself

from the expediting-obsolescence dept

Mon, Jun 22nd 2015 3:51pm — Karl Bode

While the FCC has been engaging in a slew of consumer-friendly moves of late (from tougher neutrality rules to fighting for municipal broadband), a few weeks ago the agency turned heads by fully prohibiting towns and cities from imposing price controls on TV service. According to the FCC's announcement on the matter (pdf), they're doing this because they believe the cable industry is so competitive, such local TV price restrictions are no longer necessary. The FCC voted 3-2 to approve the measure, with Wheeler uncharacteristically siding with the agency's two Republican Commissioners to support it.

Wheeler not only bucked consumer advocates and his Commission allies, he ignored the FCC's own intergovernmental advisory committee, which advised against the change. And while Wheeler's been notably more consumer friendly than anybody expected, consumer groups like Public Knowledge weren't big fans of this latest move by the agency boss:

"Congress directed the FCC to streamline the process by which small cable operators can file petitions with the FCC for finding that they are subject to effective competition, which exempts them from some regulatory oversight," said Public Knowledge senior attorney John Bergmayer. "In general, Public Knowledge agrees that the FCC should do what it can to make regulatory processes simpler for smaller entities."

"However, the FCC has gone beyond Congress's directive, adopting a blanket presumption that all cable operators, large and small, are subject to effective competition. Any analysis that shows that the largest cable companies face effective competition in their local markets is flawed. These companies bundle cable television with high-speed broadband and often have control over valuable programming. They are in a fundamentally different marketplace position than the small cable operators that Congress is concerned with."

So why would a consumer-friendly FCC boss suddenly make a decision that seems, on its surface, decidedly not consumer friendly? Well one, the existence of satellite TV and the rise of telco TV has resulted in the FCC repeatedly declaring that the TV business is effectively competitive each time cable ops apply for exemption, making this 22-year-old process effectively obsolete. Even if, as Public Knowledge notes -- broadband bundles and other factors usually mean competition can't always be adequately measured by the number of TV operators in a market. Of course, the FCC had already been traditionally letting cable operators ignore local price caps (the FCC had granted all but four of 224 such exemption requests since 2013) and they're relatively rare; Comcast estimates just 17% of its markets see them.

But more importantly, Wheeler knows that internet video is coming. Cable operators and broadcasters have, hand in hand, been raising prices hand over fist on everything from programming to DVR rentals for years, regardless of these limited localized price caps. Wheeler likely hopes that by removing already meager barriers, the cable industry will feel free to raise rates further, and be painfully punished by the rise of internet video. Basically, Wheeler is throwing the cable industry a small bone -- with the intent of letting them choke on it.

That might work over the long term, but over the short term the end result will probably only be even higher rates. That could help accelerate cord cutting, and a faster shift toward the more competitive TV market Wheeler is probably envisioning. And while giving the cable industry enough rope to hang itself might work, the problem with his scenario is that broadband ISPs will likely respond to the rise in internet video by increasing their use of broadband caps and overages. And with limited broadband competition, and the FCC generally ignoring the problems inherent with usage caps, that raises a whole slew of issues Wheeler will need to address if he's truly interested in speeding up a television revolution.

FCC 15 62A1 (PDF)FCC 15 62A1 (Text)

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Filed Under: cable tv, competition, fcc, price controls, tom wheeler

9 Comments

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Trevor, 22 Jun 2015 @ 4:43pm

What if, along with this, Wheeler wanted to let the cable companies make his arguments for him?

Take away the price restrictions, and watch prices soar without any increase in product quality (or quantity for that matter).

When the time comes, and cable companies argue that the FCC is too restrictive and sue, he can use this as evidence that the cable companies will take advantage every chance they get, as soon as the FCC backs off. Thus, proving the need for more oversight of the industry.

?
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Anonymous Coward, 22 Jun 2015 @ 4:59pm

This seems like it's reading a lot into his vote that there's not necessarily evidence for yet.
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Morgan Wick, 22 Jun 2015 @ 6:56pm

The problem is that the law that applies here was written in the 90s; I think it's the 1992 Cable Act. There is no equivalent provision regarding the Internet, which wasn't even remotely relevant when the act was written. Wheeler knows that the traditional TV market is effectively meaningless at this point, but the law pretty much forces him to look solely at that. It's a change that doesn't produce the best, most ideal outcomes, but it's the only path the law leads him to take.
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Anonymous Coward, 23 Jun 2015 @ 1:20am

Re:
I was thinking the same. More so for the broadband caps in the future, even. If enough of the services people use move over to internet based ones, the more leverage the FCC can have in the always unpopular move (at least in some important circles) of regulating or restricting ISP shenanigans.
The problem right now is mustering enough faith that that might be the case. My unbelieving mind finds it hard to gather enough of it, but I can at least imagine it.
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Violynne (profile), 23 Jun 2015 @ 3:12am

I can't agree with this assessment.

Since the FCC also recently ruled states can't bar local municipal broadband builds, this ruling seems to coincide with the possible increase in competition from a city perspective, will change can occur.

As it stands now, PK is correct, but throw in municipal broadband, and the landscape changes significantly.
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jim, 23 Jun 2015 @ 5:34am

No problem?
Only, one minor problem, American broadband is only as fast as the slowest unit of the American household. Somewhere between ab, and and a b- for speed. Which translates to very low definition tv. That doesn't bode well for the last in line, er, on line.
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Anonymous Coward, 23 Jun 2015 @ 7:14am

?
Sounds like the title needs an ?
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nasch (profile), 23 Jun 2015 @ 12:01pm

Re: No problem?
Only, one minor problem, American broadband is only as fast as the slowest unit of the American household. Somewhere between ab, and and a b- for speed.

Huh?
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David Hoffman (profile), 23 Jun 2015 @ 10:30pm

Re: No problem?
I disagree. There are a lot of 100Mbps DOCSIS 3.0 down cable connection possibilities in the USA. If you have a 4 person household and each person is watching an HD show and recording an HD show, that means about 48Mbps of capability is needed. A 100Mbps connection should do fine.
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