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Policy

Cable’s Fall Agenda in D.C.

9/13/2010 2:20 PM Eastern
Washington DC's fall agendaWashington — Broadband convergence is driving communications policy here, so how the Federal Communications Commission and Congress oversee that policy is much on the minds of the cable industry as a busy summer turns into a potentially gamechanging fall and winter.

The cable operator’s role as an
Internet-service provider and online
programmer, rather than a
traditional video provider, has dominated
the policy discussions, from
reclassifying broadband transmissions
as a common-carrier service
subject to Title II of the 1996
Telecommunications Act; to migrating
the Universal Service
Fund — which subsidizes landline
telephone service to hard to-
reach rural communities — to
broadband; to the vaunted gateway
device that FCC chairman
Julius Genachowski hopes will
turn the TV set into a broadband
media player.

Even the sleepy-sounding issue
of pole-attachment rates (unless
you are paying the freight) hinges
on the issue of which portion of
that levy the FCC will ascribe to
Internet-service provision.

“The fact that this industry
built out the most robust national
broadband network, and it will
remain that way, has turned out
to be a double-edged sword,” said
National Cable & Telecommunications
Association president and
CEO Kyle McSlarrow.

“In one sense, on the business
side it has been terrific and
it has allowed us to continue rolling
out new services,” he said. On
the public-policy side, though, “it
puts you right into that vortex” of
broadband issues.

That potential move to online
video delivery is why the American
Cable Association, the lobby
group for smaller, independent
cable operators, is pushing for
consumption billing of Internet
services, said president and CEO
Matt Polka. “If video does move to
the online model and video subscriptions
go away, then we, as the
broadband provider in the community,
need to have the ability
to charge for usage.”

For now, all eyes are on the
800-pound Peacock in the room:
the deal to merge Comcast’s media
assets with General Electric’s
NBC Universal in a new, Comcastcontrolled
joint venture. While
the deal is ostensibly about only
a single merger and any conditions
would be deal-specific, how
the FCC and Justice Department
choose to treat Comcast-NBCU’s
online video component could
signal how the government will
treat access to online video for
other players going forward, as
video moves to the Web.

Polka said the ACA is not trying
to regulate via conditions, but
is instead looking at the potential
in the deal for Comcast and
NBCU to combine their program
assets to create an “over-the-top”
service that would wind up competing
with the trade group’s
members.

“Online is here and it’s unavoidable,”
Polka said, “so everything
that we do from a policy
perspective when we look at availability
of content is going to have
an online piece now.”

Both the Justice Department
and FCC have made it clear they
are looking at access to online
video in their review. In a recent
meeting between Comcast executives
and FCC and DOJ staff
members, Comcast Programming
Group president Jeff Shell talked
about the company’s “open and
nonexclusive” approach to TV
Everywhere — the industry euphemism
for Internet-delivered
pay TV content — while refusing
to “set in stone” any plans for how
content would eventually be put
online.

As cable operators put Labor
Day in the rear-view mirror,
they’re gearing up for the heavy
lifting of pushing their policy
agendas to an FCC waist-deep in
a National Broadband Plan and
legislators campaigning for reelection.

Here’s a breakdown of the policy
issues they’ll be dealing with
this fall:

Comcast-NBCU and and Title
II are going to dominate the D.C.
landscape, overshadowing but
also incorporating other issues on
cable’s policy plate. Industry talks
on the legislative solution to Title
II were ongoing last week, according
to a source, but no agreement
was expected.

TITLE II RECLASSIFICATION
The NCTA has been in talks at
both the FCC and elsewhere on
clarifying the agency’s regulatory
authority over Internet access.
Since broadband implicates everything
from telemedicine and
education to accessing government
services, the affected players
are many.

Cable operators and telcos
have done a good job at convincing
many Democratic legislators,
as well as Republicans, that unilateral
FCC action is risky business.
Their strategy has been to
head off FCC action with a congressional
solution they can live
with.

NCTA’s McSlarrow said the
FCC talks got the trade group
75% of the way to an agreement,
and the later talks pushed such a
deal’s likelihood to about 90%.

Cable operators would prefer
the targeted law to the FCC’s
proposal to reclassify broadband
as a Title II common-carrier service
with the potential threat of
rate regulation and other restrictions
down the road. For network
operators, FCC chairman
Genachowski’s pledge to forbear
all but a few of those regulations
and to steer clear of that
rate regulation or unbundling is
not sufficient protection against
a course change by future commissions
once the service is reclassified.

The NCTA has a lot of company
in that concern, including a
majority of the members of the
House of Representatives. That
number would be likely to increase
if Republicans are able to
capture some Democratic seats in
the midterm election.

While FCC talks broke off after
news Google and Verizon Communications
cut a side “policy
agreement,” that has not stopped
the NCTA and other major players
from moving the talks to a
new venue. An industry framework,
likely resembling the
Google-Verizon endorsement of
case-by-case enforcement, is expected
to come out of those talks,
but Congress would still need to
come up with a bill and pass it.
In the meantime, the FCC wants
to get moving on the National
Broadband Plan.

Applying network open-access
rules to mobile is one of the
key issues industry has yet to resolve.
One solution might be to
apply the regulations to 4G mobile
services, but not to the morelimited
3G service.

The FCC’s proposal to expand
and clarify its Internet-openness
guidelines (widely known as network
neutrality) has become inextricably
intertwined with Title II.
Any resolution of that FCC rulemaking
proposal now looks to be
pushed to 2011, with the FCC’s
announcement that it will seek
more comment on mobile and
specialized services — comments
not due until December.

COMCAST-NBCU

The NCTA has not been actively
lobbying on the Comcast-NBC
Universal deal, though, of course,
its largest member Comcast has.

A number of lobbyists who
requested anonymity said they
still expect that deal (which
would give Comcast 51% control
of a partnership with current
NBCU owner General
Electric) to get done by the end
of the year. It is already certain
to include a number of conditions
since Comcast has made
various concessions to TV station
affiliates, unions and minority
groups.

It is not clear whether access to
online content will be on that list.
The cable industry does not want
the deal to become a referendum
on the issue and has made that
clear to policymakers.

But while the NCTA, representing
the largest operators,
has stayed on the sidelines of
the deal, the small-cable ACA
has made it a priority. Polka,
who agrees that the ISP side of
the cable business is the common
thread among a number of
key issues, continues to push for
merger-specific conditions.

“One of the concerns we have
raised in the merger is the ability
of a Comcast-NBC to basically
create the same kind of
over-the-top network that they
could use in competition with
our members across the country,
using our broadband pipe,”
he said.

Look for the deal to get done
before year-end, likely without divestitures
and possibly with some
online access conditions.

UNIVERSAL SERVICE REFORM

Getting this high-cost fund under
control — which means not
supporting phone competitors
where there is already competition,
and figuring out how to
migrate the fund from phone to
broadband support — is high on
cable’s agenda. The NCTA thinks
it can be done with authority the
FCC already has. The odds are
good that some kind of reform
will be enacted, but probably
not before year-end.

Cable operators want to make
sure that transitioning the fund
doesn’t mean expanding it for current
recipients. Verizon and AT&T
are the two biggest beneficiaries,
according to the FCC, with each
getting about $1.3 billion over the
last three years.

Rep. Rick Boucher (D-Va.), who
is behind the USF reform bill, has
said controlling the size of the
fund is high on his agenda, as has
FCC chief Genachowski.

But it is less clear whether the
industry can keep some of that
repurposed support from broadband
from underwriting competition
to existing service being
supplied by cable operators. The
FCC will need to collect better
data on where broadband is and
isn’t being provided, and a defi nition
that includes speed and aff ordability
could wind up providing
support in already-served areas.

NCTA members do not get
much from the fund and are
OK with phasing out the support.
The ACA doesn’t want Verizon
or AT&T to be subsidized for
phone service in markets where
its members compete with those
telcos, but it also doesn’t want
a longer transition timeline for
withdrawing the funds from its
members that currently provide
phone service.

McSlarrow expects the FCC to
push ahead with reform. A hearing
has been set for Sept. 16 on
House Energy & Commerce Committee
chairman Rick Boucher
(D-Va.)’s USF reform bill, which
the NCTA supports. But since
there is no Senate companion
bill, the measure is unlikely to
pass this fall.

POLE-ATTACHMENT FEES
One issue on which the stars look
to be aligned for cable and the
FCC is how much cable operators
should have to pay to hook up
their wires to electric utility poles.

As part of its grand plan for
boosting broadband, the FCC has
signaled it will look to reduce the
rate telecom providers pay power
companies for pole access. Cable
operators have been arguing
for that for years, but a rate cut
would be even more important if
the FCC proceeds with Title II reclassification. Such a move would
mean some portion of cable service
would have to be ascribed to
the broadband-transmission element,
on which cable would have
to pay that telecom rate.

Despite the pushback from
pole owners, the FCC does not
want high attachment rates to
discourage broadband rollouts,
particularly in the rural areas
where there are more poles and
fewer folks with Internet service.

There is no timeline, but once the
reclassification issues are resolved,
matters ought to move ahead
swiftly and in cable’s direction.

RETRANSMISSION CONSENT

Cable and satellite operators
have been urging the FCC to step
in and “fix” the retransmissionconsent
process, most prominently
with a petition for rulemaking
that the agency is still
considering. Broadcasters have
been pushing back just as hard.

The FCC is unlikely to wade
into that issue before election
time, particularly absent any
major blow-up. The resolution of
the carriage dispute between The
Walt Disney Co. and Time Warner
Cable without an interruption of
service (“Comprehensive Peace,”
Sept. 6, 2010, page 5) removed one
potential spotlight on the issue.

Even those looking for some action
from the FCC aren’t looking
for anything to happen this year.

ONLINE PRIVACY

Online privacy bills continue to
circulate on the Hill, and Senate
Communications Subcommittee
Chairman Jay Rockefeller
of West Virginia has been very
vocal about his concerns over
targeted marketing and online
content’s accessibility by kids.

Look for more hearings in the
fall, but for most of the activity to
roll over into next year. As with the
all-video proposal, it is in cable’s
interest for the issue to get the extended
vetting that has become
something of a hallmark of the
“data-driven, transparent” Genachowski
regime.

For smaller cable operators, the
issue is not so much about the substance
of the bill, but as with many
issues, about the disproportionate
cost of the regulation on smaller
companies. Polka said the issue
for his members is more about
what the reporting and technical
requirements will be.

For big companies, said Polka, it
is just an additional cost of doing
business, but for smaller operators
the extra person-hours, paperwork
and technical requirements
could pose a problem.

September