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FCC Seeks Comment on Whether to Extend Program Access Rules Relating to Prohibition on Exclusive Contracts

February 21, 2007

The FCC has issued a Notice of Proposed Rulemaking seeking comment on whether the prohibition in the program access rules on exclusive contracts for satellite cable programming or satellite broadcast programming between vertically integrated programming vendors and cable operators “continues to be necessary to preserve and protect competition and diversity in the distribution of video programming.” This 1992 Cable Act prohibition, which requires cable companies to sell satellite-delivered programming in which they have an attributable ownership interest to competing multichannel video programming distributors (“MVPDs”), is scheduled to sunset in October 2007, after having been extended for a five-year period in 2002.

Despite the fact that cable’s overall market share has declined from 95 percent in 1992 to 69 percent in 2005, the Commission questions the continued viability of cable’s MVPD competitors as well as the likelihood of entrance of new MVPD competitors to the market in the absence of the exclusivity prohibition. In that vein, the Commission requests comment on whether the following recent developments in the MVPD marketplace have increased or diminished the need for the prohibition:

• The increase in the provision of MVPD service by local exchange carriers;

• The acquisition of DirecTV by News Corp. (noting the consolidated application to transfer control of DirecTV from News Corp. to Liberty Media recently filed at the Commission) ; and

• The acquisition by Comcast Corporation and Time Warner of the assets of Adelphia Communications Corporation.

The FCC also seeks comment on how the exclusivity prohibition impacts the development and availability of local origination, independent, and “must have” programming, including national and regional sports programming, and whether certain “marquee” programming services such as CNN, HBO, TNT, and Discovery remain essential to successful implementation of competitive MVPD services. In addition, the Commission inquires as to how cable system clustering and the distribution of regional video programming services affiliated with cable operators should affect its decision with respect to the exclusivity prohibition.

Finally, the FCC seeks comment on whether it should modify its procedures for resolving program access disputes, which currently contemplate, among other things, a formal pre-filing notification and complaint process, as well as mechanisms for conducting discovery and awarding damages. In particular, the Commission seeks comment on whether to adopt alternative procedures such as mandatory standstill agreements and/or arbitration to resolve program access disputes.

We would be pleased to respond to any questions regarding this matter.

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