Proposed MVPD ETF Rules Seen Facing Rate Regulation Arguments

While the FCC argues that its proposed MVPD early termination fee (ETF) and prorated refunds rules aren't rate regulation (see 2311220047), industry likely will oppose any draft order on rate regulation grounds, cable lawyers tell us. Whether the draft NPRM on this month's open meeting agenda gets Republican commissioner support is unclear, a 10th-floor aide tells us. The NPRM is the second refund-related video programming item before commissioners, with the chairwoman's office in October circulating a draft NRPM requiring MVPDs to refund subscribers affected by programming blackouts due to retransmission consent negotiations (see 2310110075). The aide said the chairwoman's office hasn't pressured the regular commissioners regarding the blackouts item, and the 2018 quadrennial review has overshadowed it.

Maine's successful defense of its cable TV subscription prorated refunds law in a 1st U.S. Circuit Court of Appeals challenge brought by Charter Communications (see 2201040072) may have tipped the scales in favor of the FCC acting, Potomac Law communications lawyer Douglas Bonner told us. The court ruling that the law wasn't rate regulation and the Supreme Court's subsequent denial of Charter's cert petition (see 2301090027) put more wind in the FCC's sails when it comes to agency action, Bonner added. He said cable and direct broadcast satellite interests likely would appeal any order.

"The FCC should understand that its proposals would amount to rate regulation and result in consumers having fewer options," NCTA emailed us. The group "look[s] forward to participating in this proceeding to preserve consumer choice and competitive parity. For instance, we do not support banning consumers from choosing a service plan with discounted rates in exchange for long-term service agreements that may include early termination provisions."

A lawyer with cable experience told us the draft doesn't seem to relate directly to the 1st U.S. Circuit decision, but rate regulation was a large part of Charter's fight against that law, and the Communications Act's restriction of rate regulation by states and the FCC will likely come up again in relation to the commission's proposal. He said it wouldn't be surprising if Republican commissioners oppose the NPRM on rate regulation grounds, or concur but try to insert questions into it related to rate regulation.

The 1st Circuit's logic, as well as the New Jersey Supreme Court's reasoning in upholding state rules on prorating cable refunds (see 2304030007), applies to the ETF fee proposal, the FCC said in the draft NPRM. Since ETFs come at the termination of service, a cap on them doesn't restrict the amount a cable operator can charge for providing service, the commission said. It said the Communications Act's structure and legislative history don't support treating ETFs as rate regulation, while ETFs don't fall within the plain and ordinary meaning of rate regulation.

The FCC in the draft said the item is largely driven by the White House's 2021 competition executive order (see 2107090006), which urged the FCC to tackle ETFs. A changing marketplace also could be driving the timing, Middle Tennessee State University media arts professor Roger Heinrich wrote in an email. He said consumers having more choices for media content today could be a factor. With the rise of cord cutting, he said, "cable companies and satellite providers are forced to comply with consumers' demands or risk more customer losses." There also have been changes in regulatory attitudes over the past decade, with many becoming more consumer-centric, said Heinrich, who also is vice chairman of the Murfreesboro, Tennessee, Cable Commission. "Media consumers have more access to information (via the internet) and therefore can voice regulatory concerns more effectively," he said.