In a unanimous decision, the FCC has decided not to extend its program access rules beyond the scheduled October 5, 2012 sunset date. [1] The Commission believes that the marketplace for video content has become sufficiently competitive to obviate the need for an absolute ban on exclusive contracts for satellite cable programming or satellite broadcast programming between any cable operator and any cable-affiliated programming vendor in areas served by a cable operator. Congress enactment the rule in the 1992 “when cable operators served more than 95 percent of all multichannel video subscribers and were affiliated with over half of all national cable networks.” [2]
To
guard against the possibility of ongoing harm resulting from any individual
exclusive access contract, particularly in regional markets and for specific
types of content like sports, the FCC will consider complaints on a
case-by-case process. [3] The Commission will retain a
rebuttable presumption that an exclusive contract involving a cable-affiliated
Regional Sports Network (“RSN”) has the purpose or effect prohibited in Section
628(b) of the 1992 Act [4] that established the ban based
on the assumption that the FCC needed to preserve and protect competition and diversity in the
distribution of video programming. The
Commission noted that additional safeguards exist in its conditional grant of
authority for Comcast to merge with NBC/Universal. [5] Additionally the Commission
stated that it will require program suppliers to honor the full term of
existing supply contracts and access complaints can include claims of
discriminatory treatment where a supplier provides access to one or more
distributors, but not to others. Lastly
the FCC stated its intention to continuing monitoring the video programming
access marketplace to ensure that “the expiration of the exclusive contract
prohibition, combined with future changes in the competitive landscape, result
in harm to consumers or competition . . ..” [6]
In
the Further Notice of Proposed Rulemaking in MB Docket No. 12-68, the FCC
proposed specific rebuttable presumptions about exclusive RSN access
contracts. The Commission sought
comments on whether to establish a rebuttable presumption that an exclusive
contract for a cable-affiliated RSN, regardless of whether it is terrestrially
delivered or satellite-delivered, is an “unfair act” under Section 628(b) of
the 1992 Cable Act as well as a rebuttable presumption that a complainant challenging
an exclusive contract involving a cable-affiliated RSN is entitled to a
standstill of an existing programming contract during the pendency of a
complaint. Additionally the Commission
proposed to treat as rebuttable presumptions with respect to the “unfair
act” element and/or the “significant hindrance” element of a Section 628(b)
claim challenging an exclusive contract involving a cable-affiliated “national
sports network” and a rebuttable presumption that, once a complainant succeeds
in demonstrating that an exclusive contract involving a cable-affiliated
network violates one or more provisions in Section 628 of the 1992 Cable Act.
The
FCC’s decision not to maintain a bar on exclusive program access contracts
represents a conclusion that the video programming marketplace evidences
greater competition and less domination by vertically integrated companies,
such as Comcast, that have ownership interests in both video program creation
and distribution. The Commission
acknowledges that “the record here shows a mixed picture,
indicating that vertically
integrated cable programmers may still have an incentive to enter into
exclusive contracts for satellite-delivered programming in many markets.” [7]
However,
“the record evidence indicates that the cable industry’s share of MVPD
subscribers nationwide has continued to decrease, from 67 percent in 2007 to
57.4 percent today, which indicates that vertically integrated cable operators
as a whole – and considered solely on a national basis – have a reduced incentive
to enter into exclusive contracts, compared to 2007.” [8] On the other hand, the Commission noted that
vertically integrated cable operators have maintained, or increased their market
share in certain specific certain Designated Market Areas (“DMAs”). Previously the Commission had determined that
market shares in the range of 67-78 percent provided sufficient incentive and
ability to use exclusive programming contracts as a way to maximize
profitability. The Commission noted that
major multiple system operators, such as Comcast and Time Warner Cable, have
pursued a clustering strategy in many DMAs accruing market share in excess of
70 percent. [9] Notwithstanding such
concentration of control in many major metropolitan areas, the Commission has
confidence in its ad hoc, complaint driven process in lieu of an absolute bar
on exclusive program access contracts:
Because the record
before us indicates that there may be certain region-specific circumstances
where vertically integrated cable operators may have an incentive to withhold
satellite-delivered programming from competitors, we believe that a
case-by-case approach authorized under other provisions of the Act – rather
than a preemptive ban on exclusive contracts – will adequately address
competitively harmful conduct in a more targeted, less burdensome manner. We disagree with commenters to the extent
they imply that Congress intended the prohibition to expire only once
vertically integrated cable operators no longer have any incentive to enter
into exclusive contracts. Such an
interpretation contradicts Congress’s recognition that exclusive contracts do
not always harm competition and can have procompetitive benefits in some cases.
[10]
[1] Revision of the Commission’s Program Access Rules, Report
and Order in MB Docket Nos. 12-68, 07-18, 05-192, Further Notice of Proposed
Rulemaking in MB Docket No. 12-68 Order on Reconsideration in MB Docket No. 07-29,
FCC 12-123 (rel. Oct. 5, 2012); available at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-12-123A1.doc.
[2]
Id. at ¶1.
[3]
“.In addition to allowing us to assess any harm to competition resulting
from an exclusive contract, this case-by-case approach will also allow us to
consider the potentially procompetitive benefits of exclusive contracts in
individual cases, such as promoting investment in new programming, particularly
local programming, and permitting MVPDs to differentiate their service
offerings.” Id. at ¶2.
[5]
[A]pproximately 30
satellite-delivered, cable-affiliated, national networks (accounting for 30
percent of all such networks) and 14 satellite-delivered, cable-affiliated,
RSNs (accounting for over 40 percent of all such RSNs) are subject to program
access merger conditions adopted in the Comcast/NBCU Order until January
2018. These conditions require
Comcast/NBCU to make these networks available to competitors, even after the
expiration of the exclusive contract prohibition.” Id. at 4.
[6]
Id. at 4.
[7]
Id. at 17.
[8]
Id.
[9]
“The Commission has, in past
orders, observed that clustering may increase a cable operator’s incentive to
enter into exclusive contracts for regional programming. In the 2007 Extension Order, the
Commission noted that Comcast passed more than 70 percent of television
households in 30 Designated Market Areas (DMAs) and TWC passed more than 70
percent of television households in 23 DMAs.[9] Based on the 2011 data provided by the cable
operators, Comcast now passes more than 70 percent of television households in [REDACTED] DMAs and TWC passes more
than 70 percent of television households in [REDACTED] DMAs. Id.
at 19.
[10]
Id. at 21.