Effective Competition Order Petitioners, FCC Argue Cases Before DC Circuit
Massachusetts is now a key battleground over the legal challenge to the FCC's 2015 effective competition order, with much of oral argument Thursday before the U.S. Court of Appeals for the D.C. Circuit revolving around how much the state is representative of the cable market. Stephen Kinnaird of Paul Hastings -- representing petitioners NAB, NATOA and the Northern Dakota County (Minnesota) Cable Communications Commission -- told us a decision on their appeal could take many months, given the multiplicity of issues involved and whether there is any dissent. "There is a lot to digest," he said.
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A universal presumption of effective competition "doesn't work," given the dozens of Massachusetts communities that still have a valid franchising authority certification per an FCC Media Bureau order in January, Kinnaird said. Average U.S. rainfall of 30 inches "doesn't prove every town, even in the Nevada desert, has 30 inches," he said. That led to a back-and-forth between Kinnaird and Judges Douglas Ginsburg and Cornelia Pillard about whether any presumption could ever be employed in regulations. Kinnaird maintained there doesn't have to be an effective competition presumption and Pillard said either finding -- effective competition or the lack of it -- is a presumption. "There is a baseline either way," she said. Judge Karen Henderson also heard the case. The cable industry has backed the FCC's changing the effective competition presumption (see 1602170012). The petitioners have argued the FCC should have asked Congress to act on effective competition (see 1603300016).
Pillard also questioned the FCC as to why Massachusetts shouldn't be considered typical for the cable market. A cluster of franchise areas that deviate significantly almost surely would be outliers, FCC counsel James Carr said, adding that designated market area numbers show that every DMA -- which are far bigger than franchise areas, he conceded -- has effective competition. "There is not any evidence ... that shows there is some marked deviation from the mean," he said. When the effective competition NPRM asked if any geographic areas should be excluded, he said, "no one raised a peep."
The Massachusetts data "misses the forest for the trees," Carr said. The paucity of revised certifications from franchising authorities wishing to keep their existing certifications filed in the 90 days after the effective competition rules took effect in September 2015 helps confirm that shifting the effective competition presumption made sense, he said: It means the volume of rebuttals will be much less than the volume of petitions by cable operators was. Carr said that by having a statewide franchising authority, Massachusetts had a keener interest in keeping regulatory authority.
The FCC jumped on the 2014 Satellite Television Extension and Localism Act Reauthorization Act as an opportunity to shed duties "it long had been keen to escape," Kinnaird said. The order violated STELAR, which aimed at streamlining the effective competition process only for small cable operators, not the industry as a whole, and the new presumption of effective competition doesn't line up with the commission's statutory duties, he said.
The FCC -- having processed 228 effective competitor petitions between January 2013 and March 2015, granting 224 entirely and the other four in part -- saw a rebuttable presumption as making perfect sense and creating a more efficient structure, which is what STELAR required, Carr said. Pillard questioned how flipping the burden from cable operators to local franchise authorities (LFAs) squares with the Communications Act's Section 623, which creates a mechanism for cable operators seeking a review of effective competition. Carr asserted Congress' intent in STELAR was a process that ended rate regulation as soon as possible, which its order did.
Kinnaird also challenged the FCC DMA evidence. The agency made no findings about the DMA evidence nor made any analysis of it, he said. While most DMAs have direct broadcast satellite and telcos acting as significant competitors to cable, he said, "'Most' is a wiggle word." He argued that Congress clearly didn't make finding of effective competition contingent on LFAs by the fact effective competition ties into a variety of other requirements, like the FCC's duty to report cable pricing when it finds effective competition.
Pillard at one point questioned Kinnaird's assertion that high statistical probability of effective competition isn't proof of it. "Satellite operators are present everywhere," she said. The judges also repeatedly delved into the significance of few franchising authorities filing revised certifications after the 2015 order. Contested submissions can be costly undertakings for local franchise authorities, Kinnaird said. Simply filing the revised certification itself isn't expensive, Ginsburg said. Kinnaird said the FCC used to maintain that failure of a cable operator to file an effective competition petition wasn't evidence of the absence of effective competition, so the converse can't be true.