FCC Chairman Julius Genachowski speaks in 2010. (Bloomberg )
The Federal Communications Commission has decided not to extend its regulations requiring cable operators that own programming to make that content available to rival pay-TV distributors such as satellite broadcasters.
Known as the program access rules, the regulations were a key part of the 1992 Cable Act and credited with driving the growth of the satellite broadcasting industry. At that time, there was far more vertical integration between cable operators and programmers. Lawmakers were worried that cable operators that owned programming would refuse to sell that content to competitors.
However, now that DirecTV and Dish are viable competitors to cable, and phone companies such as Verizon and AT&T are also going head-to-head against cable providers, the commission decided to let the rules expire.
Also, fewer cable operators own content. Comcast, the nation's largest cable operator does own a lot of cable channels including USA Network and CNBC but it will continue to abide by the program access rules for the next several years as part of the government's approval of its merger with NBCUniversal.
If a non-cable pay-TV distributor believes it is being treated unfairly in trying to buy programming from a cable operator, it can file a complaint with the FCC, which will review it and decide whether any action needs to be taken.
The FCC's decision was not a surprise. The rules were initially meant to last only 10 years but were extended twice. In 2007, the U.S. Court of Appeals for the D.C. Circuit indicated that the rules had outlived their usefulness.
“We anticipate that cable’s dominance in the MVPD [multichannel video program distributor] market will have diminished still more by the time the Commission next reviews the prohibition, and expect that at that time the Commission will weigh heavily Congress’s intention that the exclusive contract prohibition will eventually sunset," the court said.
Still, DirecTV, Verizon and smaller cable operators fought to keep the rules intact. Google, which is launching its own programming service in the Midwest, also tried to make the case to the FCC that the rules were still important.
"While we prefer the proven, well-established rule to a case-by-case approach and merger conditions, we are hopeful the FCC is correct in concluding that its new regime will provide adequate safeguards," a DirecTV spokesman said. "If this approach is to be effective, the FCC must be vigilant in its oversight and be ready to act immediately should the cable industry re-engage in anti-competitive conduct."
FCC Chairman Julius Genachowski said the agency's decision will allow it to "continue preventing anti-competitive video distribution arrangements through a legally sustainable, expeditious, case-by-case review.”
"The exclusivity ban served its purpose, but now the facts justifying its existence have changed in favor of consumers," FCC Commissioner Robert McDowell added. "Accordingly, this creaky relic must be shown the door."
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