Cable M&A Enhances Need for Program Access Changes, ACA Says
The threat of large-scale cable mergers involving vertically integrated providers has moved the American Cable Association to pressure lawmakers and the FCC to redefine buying groups to allow program access rules to apply to the National Cable Telecom Cooperative (NCTC), the ACA told us. ACA said it has been “educating members of Congress” and meeting with FCC officials to push the issue, which was addressed but not acted on in an FNPRM more than a year ago (CD Oct 9/12 p1). With vertically integrated providers Charter and Comcast rumored to be among the companies vying to buy Time Warner Cable, “there is a heightened need” to have program access protections extended to the operators who purchase content through the NCTC, said ACA in a presentation to FCC officials. NCTC membership includes nearly all small and medium multichannel video programming distributors, said ACA Vice President-Government Affairs Ross Lieberman.
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Since the FNPRM, Comcast and NBCUniversal have submitted several ex parte filings opposing the ACA proposal. “Given today’s vibrant, competitive marketplace, the Commission should scale back, not expand, government intrusion into private marketplace negotiations,” said a Comcast filing on the matter. The FCC’s definition of a buying group “doesn’t reflect marketplace reality,” said Cinnamon Mueller cable attorney Barbara Esbin, who represents ACA.
Though there hasn’t been much movement on the ACA proposal at the FCC since the comment period on the FNPRM ended in 2012, that could change if a large cable deal involving vertical integration seems imminent, said an FCC eighth-floor official. If a cable deal involving cable providers that own programming seemed likely to come before the commission, ACA’s proposal would probably be more attractive to the commission, said the official. Without such a deal, the proposal is more likely to sit, the official said. A merger threat gives the ACA “a valid argument, from a regulator perspective,” said a cable attorney who represents NCTC members. The 2012 FNPRM tentatively supported the ACA proposal (CD Oct 9/12 p1).
Though rumors involving combinations of Comcast, Charter or Cox buying TWC have been circulating for months, it’s not certain that such a deal will happen, said SNL Kagan Analyst Robin Flynn in an interview Thursday. However, recent positive Q4 subscriber growth for Comcast might help such a deal happen, she said. Since those numbers seem to indicate the cable industry is doing better than previously thought, they make cable M&A “that much more of an attractive investment,” said Flynn. Another signal that such a deal might be in the works is Liberty Media’s attempted buyout of Sirius Radio, Flynn said. That would give Liberty -- which owns a large stake in Charter -- “more ability to take on debt,” she said. Charter, Comcast, Cox and the NCTA didn’t comment.
Program access rules don’t apply to NCTC members because the group doesn’t meet the FCC’s definition of a buying group, ACA said. Though NCTC is the largest collection of MVPDs negotiating with programmers for content, it doesn’t meet the definition because the commission requires buying groups to be liable for the contracts of all of members, something the NCTC doesn’t do. That rule is unnecessary, because NCTC members rarely default on contracts, Lieberman said. When NCTC members do default, it’s not necessary for other members to assume their obligations because the market has already created a solution, he said. “If a cable provider doesn’t pay for its content, the programmer simply stops providing them with content,” he said. Since Congress expressly stated when it wrote the statute that program access rules should apply to buying groups, the FCC is subverting the statute by not allowing it to apply to the NCTC, Lieberman said. A rule that doesn’t apply to the major buying group for all small and medium MVPDs “cannot reasonably be interpreted as providing protection to buying groups,” said ACA.
The protection of the program access rules would ensure that cable-affiliated programmers can’t discriminate against the NCTC when it tries to buy their content, Lieberman said. However, such a change is unnecessary because NCTC and NBCU already successfully do business under the current system, ComcastNBCU argued in previous filings. “NBCUniversal and other vertically integrated programmers are perfectly willing to work with NCTC as it currently operates,” said Comcast in a filing in July. “While ACA may want NCTC to have increased leverage in programming negotiations, there is no evidence of a problem that warrants such regulatory action."
Along with the definition of a buying group changed to apply to NCTC, ACA is also pushing the commission to rule that a cable affiliated programmer making a deal with a buying group can’t “arbitrarily” exclude group members that license a large amount of their programming through the group. The commission should also “clarify” that vertically integrated cable companies need to extend the same volume discounts to buying groups that they do to MVPDs, said ACA. Both proposed rules are intended to keep cable affiliated programmers from finding a way around the program access rules if they did apply to the NCTC, said Lieberman. ACA wants that protection to extend only to companies with between 1.5 million and 3 million subscribers, but Cox has opposed the “safe harbor” while echoing ACA’s concerns about changing the definition of buying groups. “The modest benefits of buying group reform can be realized only if the Commission adopts its buying group reform proposals without the “safe harbor” limitation,” said a Cox filing.