Regulation | THE CABLE PIPELINE

FCC: We Will Regulate Broadband

Since the dust has settled from a stinging defeat in federal court, the FCC has decided to move on its own to settle the broadband regulation dispute. With a 3-2 vote the commission issued a Notice of Inquiry that would set the stage for more regulatory authority of broadband.

It seems ironic that the motivating factor was the court case brought by Comcast in Federal District Court to immobilize the FCC’s efforts to sanction the service provider from throttling Bit Torrent, file sharing customers. Evidently commissioners felt not only embarrassed that it did not have authority over broadband, but that any move to interfere in future disputes in net neutrality questions would be tied up in the courts for years. Not only were those issues, but parts of the National Broadband Plan was predicated on the FCC having authority to move its agenda forward, bringing this into question.

Clearly this is a commission determined, with the necessary votes, to stem the tide of court challenges of its authority in the broadband arena. Congress has been absent in formulating any new rules to effectively address the tremendous up-surge in Internet traffic resulting in these issues being brought to the forefront. The Telecommunications Act of 1996 did nothing to address the Internet since, at that particular time; most of us were barely getting our feet wet on this new and exciting realm. Now, the landscape has changed to remind everyone involved of the potential expand or retract the Internets growth and accessibility.

With constituents on opposite sides of the regulatory debate hitting Capitol Hill with power lobbyists, congress is now weighing in on the issue with rumblings of new bills to clarify the FCC’s responsibilities. A democratic congress could assure that laws are enacted to give the FCC its due course in reining in a perceived Wild-Wild West Show the Internet has provided by solidifying an upfront regulatory environment.

Whether this will dampen investment in the very technology that could create and sustain new jobs should weigh in on every lawmaker in Washington, D.C. It could also run counterproductive to the President’s already lagging approval ratings if new jobs are not both a clear and near term focus. What does the economy need: a determined focus on job creation and job sustainability? Let us not forget that market investment, not regulation, creates and sustains new jobs.

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Genachowski to Broadband: reduce prices•increase speeds•increase access•embrace competition

Broadband providers are not taking the recent move by the FCC to reclassify broadband under Title II; i.e., put broadband under its regulation arm along with the likes of telephone companies, very lightly and have come out swinging to stop that effort. See (Obama’s Internet Takeover: Telecom giant challenges FCC role in broadband)

Seemingly at issue; an appeal brought by Comcast with the D.C. Court of Appeals and the subsequent defeat of the FCC’s perceived role as a broadband regulator, ruling the communication had no authority under current legislation to sanction Comcast over a 2008 Internet throttling incident. That defeat prompted the FCC to go back in an attempt to move broadband under its umbrella of regulated services. In a recent YouTube video commissioner Julius Genachowski stated that his intentions in moving to regulate broadband was to foster an environment that would encourage competition, lower prices, increase Internet speeds, and increase access to quality broadband.

Division on Capitol Hill

Regulation of any industry is seen as anti-business and a jobs killer by Republicans, See (Boehner slams FCC for ‘takeover of Internet’) while Democrats, See (FCC’s Democrat members rally behind Genachowski on broadband reform) see the need to regulate big business as more of a tool to reign in prices and create options for consumers. Both sides have points of contention from runaway mergers with resulting job losses, to a (hands off) approach, in letting the market determine competitive outcomes. Each thinks they are right, and while a healthy debate is stamped in our government system, the resulting stalemates can prove too problematic. It’s is time to work on a compromise, a win-win for all concerned, and if not, why not?

Regulatory Ramifications

The thinking of FCC commissioners center on the idea that the Internet has become a necessity for both consumers and businesses, like electricity, telephones, water, sewer which must be cultivated, tended too, and watched over as a “mother hen”, and its authority regarding our communications infrastructure should be regulated to ensure equality for all. It is just too important of an entity not to regulate, and it has the votes to do so. While it has the votes to create regulation without going through congressional approval, it will certainly be challenged in court over this authority again. See (FCC Understating Systemic Risks of “Third Way” — Why It’s a Disaster Waiting to Happen)

Is not regulation after all, a “slippery slope”, which does not distinguish between the inherent ramifications of mandating competition, pricing, access, and Internet speeds? Genachowski made the point that only six of forty-eight current Title II rules would be applied to broadband, See (Who’s more neutral? Republican bill would forestall FCC’s ‘Third Way’), leaving one to think lightness in regulatory oversight, but just the mention of future regulation sent broadband provider stocks tumbling on Wall Street.

Without any legislative update of the Title II rules for many years, the FCC is viewed as being forced to adopt its own rules for broadband which will promote its established agenda for the National Broadband Plan. Once you go down the regulatory path it is hard to pull back on the reins, and the FCC has taken those first steps. Be careful what you as for and what you do with it once obtained. It will be slippery and may turn into mud very quickly.

Editorial: Broadband and the F.C.C. (nytimes.com)
The FCC re-classifies in response to Comcast (inpropriapersona.com)
The FCC rebounds on broadband (seattletimes.nwsource.com)
FCC’s GOP: New Broadband Rules Would Ruin FCC Credibility (huffingtonpost.com)

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Retrans-Consent: Be Careful What You Ask For!

With the recent battle between Cablevision and Disney over Retransmission Consent in New York regarding WABC-TV carriage on Cablevisions 3.1 million subscribers, and thereby producing a coalition of Cable Providers to petition the FCC to intervene in negotiations, is akin to the saying: (be careful what you ask for).

It seems to me, this is a business market negotiation best handled through competitive market forces rather than asking the FCC to get involved in a dispute between two companies. The (ax can cut both ways) when it comes to oversight of the pipeline distribution and broadcasting industries. Yes, consumers are caught in the middle, wanting pertinent and relevant programming for a reasonable price, while public negotiations and threats of signal cuts dominate the headlines; see (Cable firms seek FCC help in fee disputes).

The issue remains, how much is WABC-TV worth to Cablevision for carriage and distribution of their signal. Retransmission Consent was formulated years ago when broadcast stations wanted assurance that cable companies would carry their local signals, and be compensated for their original programming. In the beginning most broadcasters just asked for Must-Carry, or assurance their signals would be distributed by pipeline providers for 3 years, see (Moody’s expects to see more retrans battles).

Fast-Forward to today and times have changed. Providers are paying substantial sums per month to distribute most of their programming to consumers. Cable Programmers have reaped the benefits of these carriage agreements in producing top-quality programs through carriage fees along with ad supported revenues; a dual revenue model. Broadcasters are struggling to stay afloat with the single, Ad Revenue Model . Therefore, Retransmission Consent has become a battleground for demanding monthly carriage fees, just as most Cable Programmers ask for, and receive. Broadcasters have seen a significant drop in Ad Revenues in recent years along with a lose network subsidies. Without additional revenue streams, broadcasters are looking to lucrative distribution agreements to make up the short-fall.

This is a market demand negotiation, not a regulation matter for the FCC to consider. If Cable Providers want to lessen the impact of these carriage fees, they should consider (Tiering) Broadcast signals to accommodate and moderate fee increases. Yes, if negotiations demand an unreasonable price for most customers, negotiate for the signal to be on a Tier where consumers can pay an extra cost if they value the programming. Some consumers will lose in this scenario, but overall consumer rates would be adjusted for those who can afford the additional cost.

This is not a regulatory issue, but one of market demand and supply. In my opinion the coalition of cable providers should think twice before asking the FCC to intervene in their business negotiations, or risk having regulations that regulate them into non-existence. This is a Free Market System, let it work as intended.