Attempting to Hold the FCC to the Law on Effective Competition

Scott Goodwin, associate general counsel, National Association of Broadcasters, joins guest blogger Steve Traylor, executive director and general counsel, National Association of Telecommunications Officers and Advisors.

Today, our organizations – the National Association of Telecommunications Officers and Advisors (NATOA) and the National Association of Broadcasters (NAB) – along with a local franchise authority in Minnesota, filed a lawsuit in federal court challenging the FCC’s decision this past June to upend the way it determines whether cable communities are “effectively competitive.” In our view, the Commission’s decision – made over the objection of two commissioners – was bad for consumers and wrong on the law.

Under the 1992 Cable Act, local franchise authorities may regulate a number of the ways in which cable operators interact with consumers in areas that are not deemed to be “effectively competitive.” If an area reaches a certain level of competition in pay TV services, however, the local authorities are stripped of many of their consumer protection tools and the local cable operator is free to bill and set terms of service pretty much as it pleases.

Last December in the satellite reauthorization bill, Congress instructed the FCC to make limited administrative changes in the processing of effective competition petitions filed by small cable operators. Congress asked the FCC to complete this relatively simple task within six months of the bill’s passage. The notion was that small cable operators lacking in resources could benefit from a streamlined filing process without substantively changing their obligation to prove that they are operating in “effectively competitive” areas.

Rather than swiftly tackling this uncontroversial task, FCC Chairman Tom Wheeler instead opted to push through an order that turned Congress’s directive on its head. Instead of mere administrative changes, the chairman proposed to deem the entire country effectively competitive – about as substantive a change as one could imagine. To make matters worse, Chairman Wheeler also proposed to make this change for all cable operators – big and small. So what should have been an insignificant adjustment ended up being a sand-shifter that cable’s biggest players could love.

How does this change benefit consumers? It doesn’t. Literally not at all. No one could even muster a serious claim to that effect. The Commission could only tell the public that this new direction would cut down on the time it took for big cable operators to file effective competition petitions (even though an operator could file one petition covering thousands of areas) and for FCC staff to process those petitions.

In fact, consumers are the big losers in this sea change. By deeming the nation effectively competitive, the FCC stripped from local franchise authorities across the country their longstanding roles as cops on the beat. Without the power to protect consumers, local authorities are being pushed aside to allow for higher cable prices – especially for basic cable service – more mysterious fees, higher equipment costs, and the potential disintegration of the basic tier of service, including the loss of Public, Educational and Governmental (PEG) channels.

It’s no wonder that a large group of U.S. senators and representatives opposed the FCC’s decision. This group includes Sens. Barbara Mikulski (MD), Patrick Leahy (VT), Al Franken (MN), Amy Klobuchar (MN), Jeff Merkley (OR), Edward Markey (MA), Ron Wyden (OR), Bernard Sanders (VT), Jack Reed (RI), Tom Udall (NM), Sheldon Whitehouse (RI), Sherrod Brown (OH), Tammy Baldwin (WI), Martin Heinrich (NM), Elizabeth Warren (MA) and Rep. Frank Pallone Jr. (NJ-6).

Unfortunately, this action appears to be only the first step that the Commission may take that gives cable operators – yes, cable operators – more leeway in and less oversight over their customer service. Not only did the FCC vote to disable an important check on cable companies at the local level, but now it is weighing whether to dismantle part of our nation’s localized system of broadcasting, which ensures that every local community has relevant news and information available to them. This trend is even more disturbing in light of cable’s rapid consolidation and truly dismal customer service record.

This hardly seems the time to put a thumb on the scale already favoring the cable industry. We filed this lawsuit because we’re hoping to preserve one of the last vestiges of active oversight against an industry that doesn’t treat its consumers as if it is subject to any, let alone effective, competition. While federal courts traditionally give agencies a great deal of leeway, we believe that this time, they’ll recognize that the FCC went way too far.