The ruling pleased FCC Chair Kevin Martin.

Have you ever wondered why your cable bill keeps going up?  Why your cable company gives such poor quality and worse service?  Or why you get dozens of channels you never watch?

A Sixth Circuit decision last Friday gives a partial answer.

The Case

In Alliance for Community Media v. FCC, No. 07-3391 (6th Cir. June 27, 2008), local governments and surrogates of incumbent cable companies challenged Federal Communications Commission rules that aimed to open local cable franchise areas to competition.  The 2007 rules:

  • Require local franchising authorities to decide whether to accept or deny an application for a cable franchise within six months (or 90 days in the case of a telephone company that already operates within the franchise area).
  • Bar LFAs from imposing unreasonable build-out requirements on new entrants (such as a mandate that the entering cable company wire the entire area within a year).
  • Prohibit LFAs from charging franchise fees on non-cable (e.g., telephone and high-speed Internet) services.
  • Limit the ability of LFAs to force competitive applicants to provide more access to public, educational, and governmental programming than the incumbent furnishes.
  • Restrict LFAs’ regulatory authority to the aspiring entrant’s cable facilities (and not to the plant and operations that deliver non-cable services).

The FCC issued the rules, it said, because "the current operation of the franchising process can constitute an unreasonable barrier to entry for potential cable competitors, and thus justifies Commission act."  The agency also observed that, "absent Commission action, deployment of competitive video servies by new cable entrants will continue to be unreasonably delayed or, at worst, derailed."

The Sixth Circuit held that (1) the FCC acted within its statutory authority in issuing the rules; (2) the rules deserved judicial deference under Chevron USA v. Natural Resources Defense Council, 467 U.S. 837 (1984); and (3) the agency didn’t behave arbitrarily or capriciously, didn’t abuse its discretion, and didn’t otherwise violate applicable law.

FCC Chairman Kevin Martin said:

I am pleased that the Court recognized and unanimously supported the Commission’s authority and our rules.  Over the last ten years, cable rate have more than doubled.  Consumers need greater choice and more competition to help address the soaring price of cable television.  This ruling helps ensure that new competitors to cable are not subjected to unreasonable delays, build-out requirements and fees when trying to compete with the incumbent cable operators.

Wiring Around Competition

The franchising rules reflect the success of incumbent cable companies in suppressing competition.  They have used (among other things) their gigantic government and public relations departments, in-house and outside counsel, and political clout to keep new entrants off their turf.  As a result, less than one percent of cable subscribers nationally have a choice of cable providers.

The incumbents’ manipulation of LFAs compounds the anticompetitive effects of big cable’s "clustering" strategy.  Especially in the last decade, large incumbents (e.g., Comcast and Time Warner) have carved the United States into areas in which one of them dominates.  The allocation of territories entrenches the dominant firm and frees it from the pressures of having a strong rival nearby.

The new franchising rules aim to restore some competition to these fortress clusters.  Which explains why big cable fought them so hard.

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