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McSlarrow Brings Energy to the NCTA

4/03/2005 8:00 PM Eastern

As the new president of the National Cable & Telecommunications Association, Kyle McSlarrow didn’t have much of a honeymoon. On March 1, McSlarrow’s first day on the job, Senate Commerce Committee chairman Ted Stevens (R-Alaska) declared his support for regulating indecent cable programming in some fashion. Slapping content controls on cable — a dubious proposition constitutionally — could end up as a sideshow. McSlarrow, former deputy secretary of the Energy Department, might instead find his time will be spent shaping a new telecommunications law and ensuring cable isn’t asked to subsidize TV stations’ transition to digital transmission any more than necessary. Multichannel News Washington News Editor Ted Hearn conducted an interview with McSlarrow on March 22. An edited transcript follows.

Kyle McSlarrow
A thumbnail bio:
Age: 44 (born June 29, 1960)
Married: Alison McSlarrow
Home: Falls Church, Va.
Most Recent Job: deputy secretary, U.S. Department of Energy
Education: Cornell University, University of Virginia School of Law
Random Notes: Twice ran unsuccessfully for the U.S. House of Representatives from Virginia. Worked for both Sens. Bob Dole (R-Kan.) and Trent Lott (R-Miss.) when each was majority leader.

MCN: How are you enjoying the new job?

KYLE McSLARROW: Love it. I knew it would be interesting, and it has been. I knew that I’d enjoy working with the board members, and I have.

What I’ve learned is that we’ve got a fabulous group of people here at NCTA. They’ve been terrific, they’ve been very supportive of me and probably they’re looking forward to that day that I stop asking them so many questions about things. But they’ve been very generous with their time and expertise. It’s everything that I thought it would be, which is a challenge on political, policy and management levels and generally, all three are what I kind of like to do.

MCN: Any surprises so far?

KM: I think I was surprised that I was hurtled into a debate on indecency on my first day. But no, other than that, it’s pretty much what I expected. I knew the issues set in front of me that’ll develop over the next couple of years.

I’m working through right now, with our senior staff and with the board, about what the strategic priorities are going to be, and that’s a several-month process. So far it’s been pretty straightforward.

MCN: David Krone is NCTA’s executive vice president. Is he going to remain with the trade association?

KM: I hope so. We have obviously worked very closely together for the last several weeks, and he is a tremendous resource and very talented. And I think from my perspective, we are an effective team. Hopefully he thinks the same as well, and I think it’d be great if he stayed here as long as he wanted to.

MCN: So you didn’t have any idea of coming in and picking your own No. 2?

KM: No, I think we’re all grown-ups. I think any time you inject a new person in the mix, everybody has to wait and see how things are working out, and one way or another, people may decide that the situation isn’t to their liking.

I’ve discovered that people here are people I enjoy working with. They have a lot of talent, they’re very good at what they do, and I think they’re a tremendous team. I feel like I’m fitting in with them.

You have to ask them whether or not they think they’re fitting in with me. It’ll take a while, but I think we’re going to be a fully effective team within a short period of time.

WHY HE CHOSE CABLE

MCN: Why did you gravitate towards the cable industry, considering your deep background in national energy policy?

KM: Because I have been interested in broadband for a long time — you know, “long” by broadband standards, which is to say really since probably ’98, ’99, in that time frame.

While I never acted on it before, necessarily, I did actually reach out to NCTA once before, in early 2000. It’s something that even in the Energy context, when I was in the [Bush] administration, I kept an eye on and was constantly pressing people to continue looking at issues related to broadband over power line, BPL.

When the opportunity came along, I could have done the energy bit. I certainly had people approaching me to do oil and gas or nuclear energy or what have you in the energy field. All of those things are great, but I just think this country fundamentally has not even reached its … potential in terms of broadband deployment. I think just our quality of life, everything that we just sort of think about and do and play on a daily basis is going to be affected by that.

Cable is right at the center of it. We would not effectively have significant deployment of broadband in this country were it not for cable. It’s just a fact, if you just look at the numbers.

So joining an industry that’s been willing to risk significant amounts of private capital in order to get to that kind of state of deployment was attractive to me. I mean there’s a mindset of innovation and forward thinking that was very appealing to me.

MCN: How seriously are you taking the indecency challenge that hit you on your first cup of coffee?

KM: I take it seriously. I think more importantly the industry takes it seriously, and the industry has been taking it seriously for quite a long time. A year before I arrived, the industry as a whole had started the “Cable Puts You In Control” campaign, with the PSAs that are running and the various workshops that are taking place. So clearly, the industry as a whole was moving forward in terms of both being creative about the tools that empower parents to control the home environment, but also educating parents and policymakers about what tools were available.

Yes, it sort of bubbled up again the first day that I was in this job, but it’s been going on for a while. I think it’s something that we just have to continue working through and we will.

MCN: Is cable preparing a response to Sen. Ted Stevens (R-Alaska) on indecency?

KM: We’ve responded several times already. Let me just say this: I’m not going to get into the details of what we’re talking about with Sen. Stevens.

Part of it is an effort to understand not just Sen. Stevens, but actually I’ve met with most people in Congress who are concerned about these issues. First, to understand exactly what their concerns are. Second, to make sure they understand what it is that we have been doing and what cable is doing, and then try to work together to see whether or not there is anything additional that might be done that addresses those concerns.

We’re still in the middle of that exchange of information. We’ve responded, but it’s not like it’s just been one response. It’s been a continuous conversation.

MCN: Stevens is saying that the constitutional concerns that cable has raised are manageable and current parental controls that the industry uses are not acceptable. What do you say to that?

KM: I think the right answer doesn’t ever put us in a place where we have to question what the Constitution says. My hope is that we can address the concerns that have been expressed in a way where you don’t ever have to get to a question of whether or not the Constitution prohibits or allows certain activity.

As I have said publicly before, we all have a shared responsibility — first, the parents have a huge responsibility, but also any part of the industry, whether it’s cable or satellite or broadcasters, has a responsibility, and obviously the government does too.

The preferred solution is one where the marketplace and the particular industry and parents arrive at a solution that addresses these concerns. That’s clearly the preferred solution. While it may be challenging, I don’t believe that it’s inescapable that you couldn’t arrive at that point.

Before you ever get to the point where you start talking about what the government can do, I think we need to explore those kinds of options, and I think — obviously whether it’s the FCC or a congressional committee or the House and Senate as a whole — we have to understand where it is we’re going and we just have to keep talking through it. We all understand what the constitutional arguments are, but to me it’s already broken down if that’s the place you start.

ON TIERS AND RATINGS

MCN: To what extent do cable-programmer/cable-system carriage contracts limit your ability to meet some of Stevens’s concerns?

KM: I don’t know, is the short answer. My guess is that the kinds of tools that we’re talking about are tools that the operators and programmers can work through in a way that their made available to any parents, just as they are today. So my sense of it is that those are not showstoppers.

MCN: What Stevens wants is to see cable break up expanded basic and apply movie industry ratings to the new tiers. Is that a problem, and if it is, why?

KM: I think partly this conversation is understanding exactly what it is we’re capable of and are doing today. We’re obviously rating shows today. The question is, what additional ratings schemes might there be? I don’t know that any are necessary.

I’m not certain that’s what Sen. Stevens is necessarily saying. But we rate shows, except for news and sports. So if the issue is there’s something ineffective about the ratings scheme itself, then let’s tackle that head-on. Those are the kinds of conversations that we’re having right now.

MCN: What he’s saying is that it is inappropriate and unacceptable for parents to have to buy an 80-channel block of cable and then have the cable operators say, 'Just block out the bad stuff, but you’ve still got to pay for it.’ Has Sen. Stevens gotten the cable industry’s attention on this issue, and do you really see it as a real threat to a business model that’s basically been in existence for decades?

KM: First of all, business models change all the time, and even in this industry they change, even in the last decade. Second, I think he has — and again, I’m sort of loath to negotiate through the press — expressed a concern, and partly it’s our job to make sure that we explain what it is we’re doing now, to explain why the business model that basically prevails today is a net plus for consumers. He’s listening to that.

Whether or not that’s persuasive at the end of the day, time will tell. But there are very good reasons why the marketplace has essentially produced tiers in the way that we do the expanded-basic package, so that people have access to the greatest number of channels for really the lowest per-channel cost.

If the marketplace drives a different solution, then so be it. It may well be that one day a different model will evolve. But that’s a far different cry from saying that the government should dictate what the tiers should look like. Again, I don’t think we’re to that point. I’ve read what he’s said, I’ve talked to him directly, but he has not put anything hard and fast to us. He’s essentially expressed the concern, he’s floated ideas, we’re thinking about ideas ourselves, and we’ll see how it goes.

MCN: It looks like [House Energy and Commerce Committee chairman Rep. Joe] Barton [R-Texas] and Stevens are taking a big swing at cable. I’m trying to get some sense from you, to what extent is the NCTA executive committee really taking this to heart and really trying to understand whether or not fundamental changes are going to have to occur?

KM: You’re absolutely correct that you’ve got two chairmen who are hugely important in many ways who are focused on the issue, so of course, it has our attention. But I’ve met with Stevens; I’ve met with Barton. There are lots of issues that we’re discussing. Indecency is clearly one of them.

There are many others, and all of those issues are the subject of discussion among programmer CEOs, among operating CEOs, our board. We’ve had several conversations about them. So it’s not just one set of issues; it’s many issues. Any time the chairman has a viewpoint that affects the cable industry, it’s something we’re going to take very seriously. It just goes with the territory.

MCN: Stevens is attending the National Show in San Francisco, hoping to hear from NCTA on the indecency issue. Will he?

KM: I’m almost certain it will come up.

He’s not showing up just to hear about indecency. We invited him some time ago, even before I even I arrived here, and he agreed to come. It’s a question of scheduling and it’s my understanding is that he’ll be there I think on Sunday.

I don’t know how long he’s going to be there, but it’s certainly going to come up. But there are a lot of issues that we’re going to talk about. There’s a lot on the plate, in terms of what Congress is thinking about, issues that affect this industry.

It’s certainly not going to be ignored.

MCN: There’s a new FCC chairman in Kevin Martin. Are you concerned about his advocacy and support for family-friendly tiers and more a la carte channels provided by cable companies?

KM: I haven’t had a chance to sit down with him. We’re obviously going to see each other at the convention. Our first meeting, just because of scheduling, doesn’t occur until right after the show. I’m going to withhold comment until I have a chance to talk to him directly.

MCN: Martin also favors multicast must-carry. Have you heard whether he plans to reconsider the Feb. 10 vote that rejected multicast must-carry?

KM: I would be surprised. I hadn’t heard that. I would be surprised if that were reconsidered.

ON TELCOS AND MERGERS

MCN: To what extent is the NCTA going to raise questions about or seek conditions on the proposed mergers between SBC Inc. and AT&T Corp., and Verizon Communications Inc. and MCI Inc.?

KM: I think NCTA as an organization is unlikely to raise questions about those mergers. There may be individual companies that do.

Clearly, mergers always initiate a very comprehensive examination of associated issues, so I have no doubt that they will be considered. Mergers, as mergers, are really none of our business. It’s somebody else’s business decision, and, frankly, we have many other things to focus on.

MCN: How closely is NCTA monitoring cable TV construction by SBC and Verizon, without going through the proper local authorities?

KM: It’s not just a question of monitoring. We’re very much engaged in it. Our vision of the right model, whether it’s voice or video, is openly going to be a state where a deregulated environment is conducive to competition.

In the meantime, when it comes to video, Title VI [cable franchising] clearly applies, and the requirements of Title VI should be complied with. There are different things happening in different places by different companies. We’ll have to take each one of them as they come. But we’re not going to just sit back and let a potential competitor not comply with the rules that exist today.

The more interesting question is what should be the rules that apply down the road. That’s something that obviously Congress is going to take up this year, most particularly with the IP voice and video issues, put together with the FCC with their proceedings on IP-enabled services.

We’re going to be very much engaged in that, defining that end state. You know the numbers: We took the $95 billion of private capital and invested it. We did that before anybody else. It has inured to the benefit not just of the cable industry, but the American public. We stepped up in a relatively deregulated environment and everybody’s been a winner. I want that to continue, and that applies to any service.

MCN: Is the NCTA actually funding the efforts of local governments to hold SBC and Verizon to Title VI?

KM: I don’t think we’re funding anything like that. I think we’ve got our state cable associations testifying and providing information. To my knowledge, we’re not funding anything like that.

It’s not even clear to me [that] localities from state to state are even acting the same.

MCN: In what sense?

KM: From one state to another, localities aren’t necessarily fighting what’s taking place.

MCN: In the future, might NCTA partner with the Baby Bells to come up with rules that sort of write the cities out of the whole regulatory process?

KM: I don’t think we’re at that point in terms of what the future looks like. There’s a huge sort of public policy imperative for localism that’s been the norm in the cable business for a long time, obviously, whether or not you’re talking about local franchising or you’re talking about local content in terms of broadcast. I don’t see those going away. I think from our point of view, this isn’t about local versus state franchising certification. Today, the state of the law is local franchises. If that’s the state of the law, it applies to us, [and] it should apply to everybody who’s offering a cable service — period, end of story.

Down the road, whatever the rules are — and municipalities can speak for themselves, and states can make their own decisions — the rules ought to be fairly applied to all. That’s our position.

MCN: I’ve heard rumors that the cable industry is not happy that Sen. Stevens is promoting his former aide, Earl Comstock, for a seat on the FCC because Comstock has been representing EarthLink Inc. over the years, trying to force cable to carry EarthLink on its cable-modem platform. Can you discuss that at all?

KM: I can just tell you from my perspective, I have not heard anybody express that. Earl Comstock is a friend of mine. I know him to be a very capable, honorable guy. He would be a fine commissioner if that’s what the president chooses to do. I don’t have any inside knowledge as to who’s going to be selected, and I have no doubt that if he is selected, we’ll work with him as effectively as anyone else.

I think it’s a mistake [and] it’s an understandable mistake when people look at people, if you’re a lawyer in litigation that you were a participant on before you went on to a commission.

What I have discovered in my long-lived career in Washington is that you never know how people are going to judge issues when they actually are in independent-commissioner status. They tend to surprise people.

MCN: Did that happen to you at the Energy Department? Did you walk into the job with a certain set of convictions and attitudes that kind of got washed away by the reality of the job?

KM: No, I’m distinguishing between Cabinet agencies and independent commissions. Commissions like [the Federal Energy Regulatory Commission] or FCC are set up to be independent. Yes, they are political in the sense they’ve been nominated by the president and confirmed by the Senate, but they’re designed to be independent and they usually are, after a fashion.

It’s a little different when you’re a Cabinet agency. Our job, when I was in the [Energy] Department, was to implement the president’s agenda. There was never any question about that.

ON A DTV 'HARD DATE’

MCN: Do you see any problems for cable in this digital-TV legislation percolating on Capitol Hill?

KM: You mean the hard date? From our perspective, the issues that need to be resolved are mainly the issues of how it’s implemented.

If Congress selects a date, whenever that might be, really the issue is going to be how we ensure that we’re able to offer our customers the services they want.

If we’re able to downconvert at a headend and provide analog signals to those people who still have analog sets and digital to those who have digital, then we’re going to be in a place where we can respond to our customers.

We really don’t have to go beyond that into the other issues that are going to affect other providers of services. That’s not clear yet.

We just want them to understand that whatever it is they do, there is an impact in terms of how it’s implemented for cable customers. We’ll be very much engaged in that.

MCN: Some lawmakers want NCTA and the National Association of Broadcasters to cut a deal on multicast must-carry. Is something like that being worked on?

KM: There have been many discussions that pre–dated my arrival that I’m sure will continue. My posture is I’m always going to talk to anybody. If there’s a way you can resolve issues, without, A, resorting to Congress or, B, resorting to courts, that’s clearly preferable.

In addition to that, when I met with chairman Barton, I told him that I wanted time to think about what kinds of issues there might be and whether or not we, as an industry, could provide solutions. We obviously have just gone through a period of time where we prevailed on dual must-carry and multicast before the FCC. No one has persuaded me that it is necessary to give up on those positions in order for a hard date to be passed into law. But there may be other ways that the cable industry might be able to be part of the solution, and so we’ll take a look at that.

ON REWRITING TELECOM ACT

MCN: A new telecommunications law is also taking shape on Capital Hill. Is it still the NCTA’s position that major changes in telecom law are unnecessary?

KM: Part of the problem here is the semantics of what “major changes” means.

If you accept that Congress is going to grapple with the digital transition on the one hand, and all the associated issues with IP voice and perhaps IP video, and you look at the issues that are involved with all of those things, it’s hard to conclude that you won’t actually be tackling most of the Telecom Act that exists today.

I guess what hasn’t changed is our view that the argument that the ’96 act was a failure is flawed.

There’s no American consumer today who would say anything other than, “We’re better off today than we were in ’96.” Look at the services, look at the broadband deployment.

They’re not idiots. The American people are smart. They understand because they’re living it right now. They have many more services for less money, greater variety, greater choice, greater control. Whether or not all of that is attributable to the ’96 Act is probably open to debate. But it’s hard to argue that it’s a failure.

If by rewrite somebody means completely undo, that’s just bad for the country. That’s an entirely different question from whether or not we all need — whether it’s Congress, the FCC, the industries themselves — to grapple with new technologies that have emerged and what they mean in the existing statutory or regulatory framework.

IP voice, IP video — these are clearly issues that do raise additional questions that aren’t clearly answered by the existing statutory framework.

So it’s appropriate for Congress and the FCC to go through proceedings where we all understand these issues and what the consequences [are] of going one direction or another. We’re not averse to that. That makes sense.

Getting back to my first point — it really depends on what you mean by rewrite. If by rewrite, you just mean help one group of people out of the box that they put themselves in, I don’t think that’s good for the American consumer. If it means all of us together sitting down and thinking, OK, we’re in a new day, we’ve got technologies emerging that we hadn’t even thought of nine years ago, that’s a fair thing to do, and we are already engaged in that and will continue to be.

MCN: It’s a cliche that it’s easier to stop legislation than pass it. But cable’s competitors are jealous, especially the Baby Bells, which think that they’re far more regulated than cable. Are you concerned that cable’s largely deregulatory status in the broadband world is vulnerable to reregulation?

KM: It’s not so much vulnerability. I don’t start with a premise that just because Congress is going to take a look at emerging technologies, that automatically means that they’re going reach the wrong answer.

It’s not a question of undoing our current business model. I’m not worried about us going backwards. I frankly think the American public is not going to put up with people taking us backwards.

It is a question of making sure that whatever we do in Congress or at the FCC, that we don’t miss an opportunity. We have an opportunity now to keep the broadband deployment chugging along [and] we have an opportunity to offer more services and more choice to customers. We think continuing toward a more deregulated environment is something that would be good for the consumer. It’s really about whether or not we’re going to get there and how fast.

MCN: Does a defeat in the Brand X case mean cable has more interest in seeing a new telecommunications law get passed?

KM: It’s hard to imagine that we will lose this case. That said, it goes back to the earlier point. It’s not a question of whether or not cable is interested or not interested in what Congress is doing.

Congress is going to confront a very important set of issues that relate to telecommunications, whether or not you call it a rewrite.

No matter which way the Brand X case goes, my guess is it’s going to spur legislation activity on the Hill.

I’m sure there are a lot of people out there waiting to see how it comes down. One way or another, I would expect to see some activity on the Hill that flows from the Brand X decision, whatever it is.

ON NCTA’S INTERNAL REVIEW

MCN: You are conducting an internal review at the NCTA. What’s the status of that?

KM: It started, but we’re still [in the] early days. It’s probably a three-month process. It’s both our internal look here identifying priorities, but it’s also something that involves our board members.

At the end of the day, we work for a board, and so it’s making sure that I guess in essence that our organization, our priorities match up with the business priorities of our board members, given whatever environment we’re in. That’s not something we’ll turn around in a couple of weeks.

MCN: In the back of your mind, do you have radical notions laid out for the NCTA?

KM: I have no preconceived notions. I tend to be the kind of guy that lets the facts and the arguments drive the position and not the other way around. It’s not like we can wait. We’ve got a lot going on now. We’re working with the FCC [and] we’re already doing lots of stuff with Congress on whatever issue that might be. Those things are going to happen.

It’s really a question of making sure that, as an organization, we continue to refine what we’re doing in a way that matches up with the business priorities of the board and the realities of what’s taking place in the public policy space.

I have no doubt, even though I’ve only been here for three weeks, that we have all the tools and the resources that are necessary to do that. But also I have no doubt that there’ll be some changes that we collectively here at NCTA conclude after doing an analysis are going to be necessary to do. But I would be reluctant to use the word “radical.”

MCN: The FCC fined a phone company for blocking Vonage Holdings Corp.’s VoIP service. Vonage is now claiming an unnamed cable company is blocking. Do you feel that there’s a need for the cable industry to put together some sort of good-practices policy where third-party voice providers can be assured that cable network owners won’t interfere with their VoIP bit flow?

KM: No. I think it’s a solution in search of a problem. On its face, the business model where customers actually believe that we’re doing something like that is a loser.

I think all of our CEOs have expressed themselves many times that they think so too.

I can’t comment on allegations. I don’t know anything about it. Apparently no one else does either. Nothing suggests to me that there is a problem.

 

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