Various comments from FCC commissioners to the press this week have made it clear that there is an imminent order coming out of the US regulator that will change the face of the US cable TV industry, relating to unbundling and merger regulation.
The mostly US experience of ’57 channels and nothing on’ as typified in the Bruce Springsteen track of the same name, is brought about primarily because of two things, the vast number of US channels that are used as advertising fodder by cable networks as they demand more advertising inventory to sell, and the simple fact that US TV has so much advertising per hour that zapping through all the channels with a remote control, a viewer has to go through about 3 times before they can catch each channel without adverts showing and actually find out what’s on.
There has been consumer pressure for decades on this matter wanting to buy the channels they like and no more, and the cable operators always claim that their hands are tied, and that in order to get the ‘good’ channels they have to accept all the other channels that a cable network provider bundles into the service. Buying them separately, goes the argument, means that consumers would have to pay more, whereas everyone knows that because they would only choose 20 channels out of 300 they would pay far less.
Well that was the argument that made the previous FCC chairman back off from taking on this war with cable and content companies, but now it looks like the new FCC Chairman is readying himself for a move. This will come later this month under powers that grant the FCC the ability to regulate cable if it becomes dominant, something that the FCC says is now proven.
Cable operators will continue to argue that they are still under constant threat from satellite operators and telcos entering the TV space, but statistics on the rise and rise of cable pricing, ahead of inflation, uninterrupted for decades, will be used by the FCC says the New York Times, to justify its moves.
The idea is to open up cable operators to new independent channels as well as enforce unbundling of individual channels for the consumer and while that may be a good thing, it may well end up happening for the wrong reasons. The FCC appears to be bowing to the lobbying overtures of the RBOCs that have long said that cable operators and they should be treated in the same way, as they increasingly sell the same services.
That would mean more FCC orders such as the recent ones on unifying the process for applying for and renewing a video franchise, whether it is from a cable operator or a telco, and potential future changes on incorporating cable operators into media ownership rules and unbundling of cable infrastructure to CLECs, at least to the same extent that unbundling is allowed on RBOC infrastructure, which at the moment is ‘not much.’
It could also be that the existing administration’s plans to relax media ownership rules, might be bound up with redefining cable as part and parcel of that media. Instead of rules which say that an organization may not own the main newspaper and broadcaster in a single territory, the FCC may try out a strategy of it’s okay as long as there remains a loud dissenting voice within the same territory. That is to say as long as one TV service, or one major newspaper or one radio station (or the major internet portals) are not owned by a single conglomerate that can push a single political agenda, then cross ownership is fine.
We remind readers that the last time relaxation of media rules came up in Congress it was outvoted 400 to 20, and when it was pushed through as part of a larger government appropriations bill, it was subsequently crushed by the courts. And unless considerable subtlety is applied, it likely will be again.
The other issue that the FCC is thought to be pushing on cable reform is that the remaining large US cable operators should not be allowed to merge into larger and larger consortia. Given that Comcast and Time Warner Cable have just extricated themselves from cross shareholdings and that they collectively acquired Adelphia, the nations 5th largest cable operator, it would introduce imposed growth limits. Comcast had held its customer base stationary at 21.5 million right up until the acquisition of Adelphia, and now has over 24 million customer homes. So instead of acquiring new customers it has chased the increase in the number of services it offers, such as games and HD programming and VoD and DVRs, and uses these to drive average revenue hikes.
However this could not last forever and the collective cable operators would be hampered in a long war against the RBOCs if these new reforms are passed.
Faultline has predicted that the only way for US cable to remain competitive in the long run, is by merger until there are effectively only one or two major cable operator groupings. FCC motives would come under intense scrutiny, and likely subsequent reversal by the next administration, if on the one hand it allows SBC to acquire both AT&T and Bellsouth, but stops Comcast buying say Cox Cable.