FCC Chairman Julius Genachowski signals its time for the program access… (Bloomberg )
The Federal Communications Commission is expected to phase out rules that required cable operators that own programming to make that content available to rival pay-TV distributors such as satellite broadcasters.
On Friday, FCC Chairman Julius Genachowski signaled that he is not interested in extending the so-called program access rules beyond their expiration date in October, people inside the regulatory agency said.
An FCC chairman rarely pushes an item unless he feels he has the support of the majority of the commissioners, which means it is unlikely the rules will get a last-minute reprieve. The rules were initially set to expire in 2002 but were extended twice.
Created 20 years ago as part of the 1992 Cable Act, the program access rules played a key role in the development of the satellite broadcasting industry. In those days, there was far more vertical integration between cable operators and programmers. Congress was concerned that cable operators that owned programming would refuse to sell that content to competitors.
Now that satellite broadcasters DirecTV and Dish Network have established themselves as legitimate competitors and the number of cable companies that own content has been greatly diminished, the FCC is prepared to let the regulations sunset on Oct. 5.
Cable companies have argued that the rules have become obsolete now that there is so much competition in the distribution business. Another argument for getting rid of the regulations has been that program owners want their channels distributed on as many services as possible to reach more viewers and take in more money from advertising and subscription fees.
But the satellite and telephone companies competing with cable wanted to keep the program access rules on the books. Although DirecTV now has 20 million subscribers and is the second-largest multichannel video program distributor in the country after Comcast, it had fought aggressively to preserve the laws as did Verizon and many smaller cable operators.
One concern of DirecTV and Verizon is that cable operators that also own regional sports networks will now refuse to sell those channels. In a letter to the FCC last week, Verizon said the program access rules should be maintained for regional sports networks.
Although all the details of the FCC's plans to jettison the program access rules are not known, there is not expected to be any sort of broad exemption for sports programming, a senior FCC official said.
Instead, a pay-TV distributor can file a complaint to the FCC alleging unfair acts of competition if a cable operator that owns a regional sports network is refusing to sell that channel to a rival service.
The largest vertically integrated cable company is Comcast, which after its merger with NBCUniversal became parent of several popular cable channels including USA, CNBC and Bravo. However, even after the program access rules go away, Comcast will still operate as if they were in place because it was one of the conditions it agreed to in return for approval of its merger.
Still, Comcast is a minority partner in several sports channels, and that has satellite broadcasters worried that the cable giant may have a loophole around the conditions.
The Writer's Guild of America West voiced concern about the potential negative implications of getting rid of the program access rules.
“The likely result will be cable distributors withholding programming from competitors, which isn’t good for content creators or consumers," a spokesman for the WGAW said.
Even if the FCC had tried to keep the rules, it might have faced a challenge from the cable industry in the courts. The U.S. Court of Appeals for the D.C. Circuit has previously indicated that it felt the rules had outlived their usefulness.
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