Policy

Standstill Order an ‘Unfortunate Trifecta’: NCTA

8/08/2011 12:01 AM Eastern

Washington — The Federal Communications Commission
has finally made it official. The agency’s Democratic
majority has said there must be a standstill mechanism that
could keep some channels on cable systems during carriage
disputes or compensate the winners of complaints for the
time when they’re without cable carriage.

Cable operators were not happy. They had worked to
keep the standstill out of the order and instead include
it as part of an accompanying rulemaking notice seeking
further comment.

The standstill order would apply to the price, terms
and conditions of an existing programming contract
while a complainant is seeking renewal. It applies only to
cable-network carriage, not TV-station carriage; is not
retroactive; and requires the complainant to meet several
thresholds before a standstill is ordered.

In complaints involving channels that have never been carried
or want to be achieve different placement on a channel
lineup — in which a standstill is essentially the status quo —
there can be some monetary true-up if they win their complaint.
The FCC, though, was not exactly sure how that would
work and has asked for further comment on the mechanics.

NCTA HINTS AT LAWSUIT

National Cable & Telecommunications Association President
Michael Powell called the decision an “unfortunate
trifecta” of factors:

• A flawed process that the FCC stubbornly refused to
correct;

• Substantive policy discussions that showed little regard
for the limits of agency authority or constitutional rights;

• A disturbing lack of appreciation of the potential impact
of government intervention on consumers or the marketplace.

Powell said the association would have to “explore other
avenues for redress.”

Asked if that meant the FCC would be sued, an NCTA
spokesman said the association was still assessing its options.
Asked which other options there were aside from filing
suit, he added, “not many.”

Republican commissioner Robert McDowell was on the
same page as the NCTA. But even if former FCC chairman
Powell had still been on the commission, he and McDowell
would have been outvoted.

With three Democratic votes already on the board, the only
avenue of redress for the lone Republican on the commission
was to dissent from the standstill, which McDowell did, agreeing
with the NCTA that the FCC had strayed from its procedural
moorings.

McDowell supports the parts of the order meant to
speed the complaint process, including timelines for action
and boosting the likelihood that frivolous complaints
will be swiftly dismissed.

But he had big issues with the standstill — issues that helped
push his vote to the last minute, partly to give interested parties
including cable operators more time to weigh in.

If the NCTA was looking for encouragement to take the decision
to court, McDowell provided it, saying the lack of adequate
notice makes the decision “vulnerable to court remand.”

McDowell has seen that vulnerability in other FCC decisions,
including the network-neutrality order from which he
dissented.

A cable attorney who asked not to be identified said he
thought the FCC’s focus on carriage was misplaced. He argued
that the cost of bundled programming — the extra cash
now going for retransmission payments, for example — and
the rising cost of sports rights are the real issues in terms of
what subscribers pay and how much operators have to pay for
other programming.

But one cable attorney, an NCTA
president and a Republican commissioner
don’t trump a commission
majority.

That majority prevailed last
week, deciding that “absent a
standstill, [a multichannel video
provider] will have the ability to retaliate
against a programming vendor
that files a legitimate complaint
by ceasing carriage of the programming
vendor’s video programming,
thereby harming the programming
vendor as well as viewers who have
come to expect to be able to view
that video programming.”

The standstill does not apply to
complaints already in the pipeline,
including ones by Tennis Channel
and Bloomberg TV against Comcast
over lineup placement.

Deadlines will be set for future
complaints, to advance a process
that in some instances has taken several years.

The FCC also clarified which types of complaints would be
likely to pass muster.

STANDSTILL’S NO SURE THING

But the order makes clear that while the FCC is giving guidance
on what will provide prima facie evidence of a complaint,
that finding is not the same thing as judging a complaint on its
merits or that a complaint might not meet other thresholds, including
filing within the statute of limitations.

Issuance of a standstill order is far from a given.

Programmers will need to demonstrate that “the complainant
is likely to prevail on the merits of its complaint; (ii)
the complainant will suffer irreparable harm absent a stay;
(iii) grant of a stay will not substantially harm other interested
parties; and (iv) the public interest favors grant of a stay.”

In making that case, the FCC said, cable operators get
to talk about the impact on subscribers and the extent to
which the programming vendor’s advertising and licensefee
revenues will be hurt without the standstill.

The FCC has the discretion to set a defi ned standstill
time period or continue a standstill until the complaint
is resolved — or lift it if the standstill is hurting negotiations.

September