FCC Approves Effective Competition Rule; Rosenworcel and Clyburn Dissent in Part

The FCC voted to approve a draft order that would make cable effective competition a rebuttable presumption nationwide, with both Democratic commissioners dissenting in part and approving in part and FCC Chairman Tom Wheeler and the Republican commissioners supporting the item, an FCC official told us Tuesday, the deadline for congressionally mandated changes to the rule to be approved.

Late in the day, commission Democrats had still not finalized their votes on the item, and broadcast industry officials were lobbying those offices Tuesday afternoon, industry and FCC officials told us. The Satellite Television Extension and Localism Act Reauthorization Act requires the commission to provide effective competition relief only for small cable systems by June 2 -- the draft order goes further and exempts all cable from rate regulation. Though the item was likely approved too late for an order to be issued Tuesday, the commission will probably be seen as having adopted the item within the statutory deadline, an FCC official told us.

Cable industry officials are surprised at the strong opposition to the item from broadcasters, several have told us. NAB President Gordon Smith personally visited the commission to lobby on the issue, and participated in a teleconference with Commissioner Jessica Rosenworcel Thursday to argue against the nationwide presumption of effective competition. Representatives from broadcast network affiliates groups met with aides to Commissioner Mignon Clyburn Tuesday, a broadcast industry official told us. STELAR’s relief “was intended to be limited to ‘administrative reforms’ that would not modify an operator’s ‘duty’ to prove the existence of effective competition,” NAB said in an ex parte filing. Public interest groups have also gotten involved. “Having recently advocated against the dangers of a combined Comcast-Time Warner Cable, we are surprised to see the FCC promote a regulation that would put even more power in the hands of large cable operators,” said Consumers Union in a letter to Wheeler and the commissioners Monday.

Though cable interests have scoffed at the broadcaster argument that declaring all cable to face effective competition would lead to broadcasters being removed from the basic tier, that threat is the reason behind broadcasters' vociferous opposition, one broadcast attorney told us. Without rate regulation, foreign language stations and those outside the big four will be bumped off the basic tier so that cable carriers can charge more for them, the attorney said. Cable industry officials have argued that broadcasters would be able to prevent that shift through terms in retransmission consent contracts, but the FCC has indicated that it looks unfavorably on protracted and contentious retrans negotiations, the attorney said.

Wheeler's voting apart from his fellow Democrats won’t be seen as indicating any kind of larger policy separation between them and the chairman, several industry attorneys told us. It's not clear what broadcasters' next step will be if the rule is approved -- attorneys on both sides of the issue have suggested legal action is a possibility. NAB didn't comment.