Conditions Represent A Proportional Response To Transaction-Specific Harms Identified By Smaller Pay TV-Providers, Helping Curb Attempts by Comcast-NBCU To Impose Higher Programming Fees
PITTSBURGH, January 18, 2011 – The American Cable Association commended the Federal Communications Commission for imposing meaningful conditions on the transfer of licenses associated with the Comcast-NBC Universal transaction, benefiting consumers served by smaller communications providers that negotiate with the media giant for access to its most important content on the market.
“We applaud the FCC Chairman and Commissioners for producing an order faithful to the exacting review that FCC staff performed in response to transaction-specific harms demonstrated by ACA in numerous filings and economic studies during the past year,” ACA President and CEO Matthew M. Polka said. “Under Chairman Genachowski, the FCC has set a high standard by which future transactions involving media giants with formidable market power will be judged.”
ACA praised FCC Commissioner Mignon Clyburn for insisting that the FCC not approve the Comcast-NBCU license transfers in the face of clear and convincing evidence that the deal’s potential harms would substantially outweigh the promised benefits. Commissioner Clyburn’s persistence resulted in changes made to a previously circulated order that will provide all small pay-TV operators with remedies designed specifically to protect them from the harms of this transaction.
“The simple truth is that the Comcast-NBCU transaction, as submitted to the FCC, would have reduced competition and raised consumer prices dramatically. ACA salutes Commissioner Clyburn for proposing more robust remedies to address these concerns, which will help ensure that Comcast-NBCU can’t run roughshod over ACA members in negotiating for access to key programming services for distribution over traditional and online media networks,” Polka said. “And none of this would have been possible without an FCC Chairman who also cared about these issues.”
In its filings, ACA demonstrated that the combination of Comcast and NBCU would allow the combined entity to charge higher fees for its “must have” programming to all pay-TV providers, even those who do not compete directly against Comcast. The FCC agreed and provided all pay-TV providers, including small cable operators nationwide, with the right to utilize program access conditions contained in the license transfer order.
ACA also demonstrated that post-combination Comcast-NBCU would not only charge higher prices for broadcast stations and regional sports networks under its control, but also national cable networks. Very significantly, the FCC agreed for the first time that it will provide pay-TV providers with remedies to curb Comcast-NBCU’s ability to charge above-market prices for national cable programming as well.
Also of major importance, the FCC recognized that it had to improve on past media license transfer conditions that proved in practice unusable for smaller cable companies, such as baseball-style commercial arbitration, which was shown by ACA not to be cost effective for small cable companies.
“Small cable operators know from experience with past FCC-conditioned transactions that arbitration proceedings can easily cost $1 million and span many months, if not years,” Polka said. “ACA is pleased that the FCC has taken steps to ensure that arbitration represents more real and less conjectural relief for the independent cable operator community than in the past. The special conditions for smaller pay-TV providers contained in the order are an enormous improvement over those that were contained in either the News Corp.-DirecTV or Adelphia-Time Warner Cable-Comcast orders.”
Specifically, the FCC provided two key remedies for smaller pay-TV operators:
- Pay-TV providers with up to 1.5 million video subscribers can jointly designate a bargaining agent that has the right to take Comcast-NBCU to baseball-style commercial arbitration to resolve impasses in negotiations involving not only Comcast-NBCU’s local and regional programming, but also its national cable programming; and
- Pay-TV providers with 600,000 or fewer video subscribers can utilize baseball-style commercial arbitration with a new asymmetrical cost recovery process in which these smaller operators have the right to recover their arbitration costs from Comcast-NBCU if they win their arbitration. If they do not prevail, they would be responsible for only their own legal fees and costs.
ACA especially applauds Commissioner Clyburn for her tenacity in seeking to increase to 1.5 million video subscribers the eligible size limit for pay-TV providers that wish to rely on a bargaining agent. This meaningful change ensures that all smaller pay-TV providers that routinely participate in deals negotiated by bargaining agents today may utilize the bargaining agent provision. Commissioner Clyburn was also successful in increasing the subscribership cap on pay-TV providers who may utilize baseball style commercial arbitration with asymmetrical cost recovery.
“With support from Chairman Genachowski, Commissioner Clyburn fine-tuned the conditions to offer even more protection to the 1,000 small businesses across the country that offer pay-TV service to families in their communities,” Polka said. “These changes are incredibly significant and will serve as precedent for years and mergers to come. They will ensure consumers, particularly those residing in smaller markets and rural areas served by smaller pay-TV providers, have greater assurances against being charged higher rates as a result of this deal.”
ACA recognized the efforts of many who called on the FCC to adopt Comcast-NBC Universal merger conditions with a pro-competitive framework, guaranteeing fair and non-discriminatory treatment of small cable operators serving more than 7 million subscribers combined.
ACA appreciates the sustained support from numerous Members of Congress and their staff for ensuring that competition and consumers are not harmed by this transaction. In addition to holding and/or participating in hearings, letters were sent to the FCC by House Energy and Commerce Committee Ranking Member Rep. Henry Waxman (D-Calif.), Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.), Senate Antitrust Subcommittee Chairman Herbert Kohl (D-Wisc.), as well as Senate Communications Subcommittee Chair Sen. John Kerry (D-Mass.), Senator Al Franken (D-Minn.), and Rep. Edward Markey (D-Mass.).
ACA also commends John Flynn, who headed the FCC’s review of the Comcast-NBCU transaction, and all the Transaction Team staff for their professionalism throughout this process and taking the time to understand the concerns of smaller MVPDs. It was good government at work.
Finally, ACA notes that the FCC properly concluded that the remedies will remain in effect for seven years to ensure that Comcast-NBCU cannot impose excessive programming price increases. During this period, it is essential that the FCC exercise continued diligence to ensure that all remedies will be fully implemented.
“We plan to continue to be involved over the coming years as the conditions are implemented to ensure that the new Comcast-NBCU adheres both to their letter and spirit. Too much is at stake for consumers and competition,” Polka stated.
About the American Cable Association
Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 900 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.6 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit https://acaconnects.org/