Broadband Cable Association of Pennsylvania


September 5, 2013

Federal Communications Commission regulations intended to protect programming services from being discriminated against by cable and other TV-distribution companies mostly survived a legal challenge. The U.S. Court of Appeals for the 2nd Circuit in New York preserved the bulk of the FCC's so-called program carriage rules, which were challenged by Time Warner Cable and the National Cable & Telecommunications Assn. (NCTA), the pay-TV industry's lobbying arm.

The rules -- established in 1992 and revised in 2011 -- were created to protect programmers from anticompetitive behavior by distributors. The fear was that multichannel video program distributors would favor networks they had a financial stake in over independent networks. A programmer that felt it had been discriminated against or dropped unfairly by a distributor can file a complaint at the FCC for review. "I am pleased that the court of appeals upheld the commission's program carriage rules against constitutional challenge. As the commission pointed out - and the court agreed in rejecting the cable industry's arguments - these rules remain necessary to prevent anticompetitive conduct by video programming distributors, and they empower consumers to access a rich and diverse mix of programming," said acting FCC Chairwoman Mignon Clyburn.

Time Warner Cable and the NCTA argued that the regulations violated the 1st Amendment. The court agreed that "there is no question that cable operators and other multichannel video program distributors 'engage in and transmit speech' protected by the 1st Amendment" but concluded that the rules were justified by a countervailing government interest. The court added that a "regulation of protected speech that is content-neutral and that does not disfavor certain speakers is reviewed under the less-stringent intermediate level of scrutiny."

"This opinion is significant because it shows that we can be reasonable about the 1st Amendment," said Susan Crawford, a communications professor at Cardozo Law School. "Not all economic decisions about the transport of bits are the same as messages that should be protected by the 1st Amendment." The court did not rule out the possibility that the rules could outlive their usefulness "in the not too-distant future." Time Warner Cable and the NCTA didn't come away completely empty-handed. The court overturned the regulations' "standstill" provision, which forced a distributor to continue to carry a network while the FCC ruled on the complaint.

In a statement, Time Warner Cable said it was pleased that the standstill requirement was tossed and added that it was "gratified that the court has called into question the future viability of the entire program carriage regime as competition in the MVPD marketplace continues to become more and more vibrant." The FCC can attempt to bring back the standstill rule, which was gutted on procedural grounds because it was not in accordance with the Administrative Procedure Act. "The standstill decision is a modest victory for Time Warner Cable and other cable operators opposed to the provision, but the panel's denial of their free speech arguments represents a missed opportunity as it would have strengthened the cable industry's broader campaign against programming regulation," said Christopher King, an analyst at Stifel Nicolaus Telecom Equity Research. Los Angeles

Cable cowboy John Malone is just starting to think about hanging up his spurs.

While the Liberty Media chairman has no plans to retire any time soon, he has told colleagues recently that he wants to put in place a succession plan for when he eventually steps aside, according to sources familiar with the talks. The 73-year-old billionaire oversees a far-flung media empire with investments spanning cable, satellite radio and music. His succession plan could spark a rivalry between the bosses of various Liberty-controlled companies, among them Liberty Media CEO Greg Maffei, who helped engineer the SiriusXM takeover, and Mike Fries, who spearheaded the $24 billion acquisition of Virgin Media. Malone's son, Evan, who is an engineer, is also on the boards of several Liberty-controlled companies. It's unclear if he would be considered a candidate to succeed his father.

Malone's holdings are split into three stocks: Liberty Media, Liberty Global and Liberty Interactive. Liberty Media has control of SiriusXM Radio and stakes in Discovery Communications, Live Nation and the recently spun off premium pay-TV business Starz. The firm also has stakes in media giants Time Warner and Viacom.

Malone, who led the first wave of cable consolidation in the 1980s and 1990s, is also leading the latest charge to shake up the industry. Liberty Media, which owns 27 percent of Charter Communications, has been touting the benefits of further cable consolidation, including a potential tie-up with larger rival Time Warner Cable. While TWC hasn't dismissed the idea outright, CEO Glenn Britt and other managers wonder whether the deal makes sense for shareholders, as Charter is a much smaller company with a sizable debt load. If the deal happens, it would be the capstone on a long career in cable for Malone, whose personal fortune is estimated at $6 billion.New York Post