Effective Competition Order Reflects Market, Lack of Statutory Limits Proscribing Such Rules, FCC Says

In its 58-page reply, the FCC argued the two main assertions of NAB et al. -- that the effective competition presumption exceeds statutory authority and that such a presumption is unjustified -- are baseless and urged the court to deny their petition for review. "It was both sensible and time-saving for the FCC to presume the existence of effective competition in a franchise area until the franchising authority proved otherwise," it said. NAB and NATOA didn't comment. The American Cable Association and NCTA were granted intervenor for respondent status in the suit, and their briefs are due Feb. 16.

The presumption of effective competition -- like the presumptive lack of effective competition it replaced -- is rebuttable as franchising authorities have the ability to show the competing provider effective competition test isn't met for a particular area, the FCC said. It also said the Communications Act "simply directs [it] to 'find' whether cable systems are subject to effective competition," and doesn't require those findings be based on evidence of each and every franchise area.

Nothing in the law stops the FCC from finding for effective competition if a franchising authority doesn't claim otherwise, the agency said. It said it has made it easier for franchising authorities to rebut the effective competition presumption by putting together procedures for requesting data from a multichannel video programming distributor about its reach and subscriber numbers in an area. The effective competition rules also filled its requirement under Section 111 of the Satellite Television Extension and Localism Act Reauthorization to set up a streamlined way for filing an effective competition petition, since now cable operators have to file only in response to a franchising authority, it said.

Meanwhile, the NAB et al. arguments that the effective competition presumption itself doesn't hold up fall short because competitors to incumbent cable operators have roughly 34 percent of the U.S. household market -- including about 25.6 percent held by DBS operators, the FCC said, While that data doesn't apply at the individual community level, the agency said it "could reasonably infer that those [competing] MVPDs serve at least 15 percent" of households in most markets -- 15 percent being the tipping point for determining effective competition in a market. "This approach not only mirrors current marketplace realities; it also gives effect to Congress' preferences for competition," the FCC said. It dismissed NAB et al. arguments that Communications Act Section 623 doesn't allow the agency to rely on rebuttable presumptions in determining effective competition. The commission said it has used rebuttable presumptions for years, and that section requires a revocation petition when terminating a franchising authority's certification. But the agency said Section 623 doesn't say that petition process "is the only means by which the FCC can terminate" that certification.

The commission repeatedly pointed to a changed MVPD market as justification for its effective competition rules change. The lack of effective competition that was the norm when it created the regulatory framework in 1993 to implement the 1992 Cable Act no longer holds true, given the rise of such cable competition and the rise of DBS service and multichannel video services provided by phone companies, the agency said. Between January 2013 and March 2015, the FCC said its Media Bureau granted 224 effective competition petitions in their entirety and four in part, while it declined to find effective competition in seven communities.