Declining Cable Market Power Undermines Must-Carry, Attorney Says

Increased competition in the video industry may have undermined the basis for must-carry rules, argued Latham Watkins cable attorney Matthew Brill at a Federal Communications Bar Association continuing legal education event Monday evening. Recent federal court opinions in cable program carriage cases Comcast v. FCC (CD May 29 p1) and Time Warner, NCTA v. FCC (CD Sept 5 p4) have said that cable’s decreasing market power is eroding the legal basis for many of the provisions from the 1992 Cable Act designed to protect broadcasters, Brill said. Along with recent program carriage cases, the FCBA event touched on Aereo’s case before the Supreme Court.

The must-carry rules were upheld in Turner Broadcasting v. FCC, a pair of cases that Brill said resulted in a decision that linked must-carry rules to the market power of cable relative to programmers. Those rules shouldn’t apply “in an environment where cable is not a monopoly,” said Brill. With viewers able to access content on Netflix or Hulu as alternatives to cable, cable no longer has the “bottleneck power” that justified must-carry rules, Brill said.

The U.S. Court of Appeals for the D.C. Circuit opinions in Comcast and Time Warner pointing to cable’s declining market power were both minority opinions written by Judge Brett Kavanaugh, pointed out Andrew Schwartzman, public interest attorney and Benton senior counselor at Georgetown Law’s Institute for Public Representation. Kavanaugh is “running a one-man crusade” against the 1992 Cable Act, Schwartzman said. Must-carry rules are designed to protect “weaker” stations that “don’t have the power” to force their way onto cable, Schwartzman said.

Arguments that cable doesn’t have bottleneck power are missing the fact that access to Hulu and Netflix comes through Internet connections that are often provided by cable companies, Schwartzman said. Multichannel video programming distributors also have bottleneck power in the sense that they control what programming their subscribers watch, said Wiley Rein communications attorney Eve Reed.

Support for rules protecting broadcasters may be further undermined by the incentive auction, Brill said. “Far from saying broadcasting over-the-air needs to be preserved for all time, the government is actually willing to pay stations to leave broadcasting,” he said.

The Aereo case and the different court decisions involving that company and its competitor FilmOn are a sign that the Copyright Act is “poorly written,” said Public Knowledge Senior Staff Attorney John Bergmayer. “That’s why you have such divergent decisions,” he said. The 2nd U.S. Circuit Court of Appeals decision at the heart of the case concerned only a preliminary injunction, and the case still remains to be tried on the merits, making it unusual that the Supreme Court granted cert, said broadcast attorney Jack Goodman. “They like cold, dead records,” Goodman said.

If the case is tried on the merits, the introduction of evidence on Aereo’s antenna system could shake up the company’s case, Goodman said. Aereo’s case is based on the idea that each customer is assigned an individual dime-sized antenna, receiving its own broadcast signal. However, some engineers believe it’s not possible for such small antennas to receive broadcast signals on their own, Goodman said. Instead Aereo’s ability to pick up broadcast signals could be a function of an array of those antennas working together, which could have implications for their arguments in court, Goodman said.

A Supreme Court Aereo decision may not take the form either Aereo or broadcasters are expecting, said Schwartzman. Justice Samuel Alito has recused himself from the decision to grant cert and a subsequent motion in the case, an indication he will likely be recused from the whole decision, Schwartzman said. That could lead to a 4-4 split in the case, which would uphold the 2nd Circuit decision in Aereo’s favor. “I think it’s very close,” Schwartzman said of the Supreme Court vote.