FCC Commissioners Withhold Support for Martin's 70/70 Conclusion

November 27, 2007. The Federal Communications Commission (FCC) adopted, but did not release, a 13th annual report to the Congress on the status of competition in the market for delivery of video programming.

The FCC adopted its Twelfth Annual Report [161 pages in PDF] on February 10, 2006, and released on March 3, 2006. Hence, this 13th Report is late. See also, story titled "FCC Describes Annual Report on Video Competition" in TLJ Daily E-Mail Alert No. 1,308, February 13, 2006.

Also, the FCC has yet to release this 13th report. It has only issued a release [5 pages in PDF] that describes it. The five Commissioners each wrote statements.

The FCC's release states that the report addresses the 70/70 test, which Chairman Martin had sought to employ as the basis for imposing new regulations upon cable companies. Three of the five Commissioners (McDowell, Tate, and Adelstein) blocked Martin's initiative.

The FCC's release states that "This year we find that based on data from Warren Communications News, the second prong benchmark has been met at 71.4 percent. However, other data sources do not demonstrate that the second prong has been met. As a result, we conclude that the only way to accurately measure the 70/70 test is to collect data directly from the cable industry."

It adds that the FCC "requires each cable operator to submit the following information for 2006 within 60 days under penalty of perjury: 1) the total number of homes the cable operator currently passes; 2) the total number of homes the cable operator currently passes with 36 or more activated channels; 3) the total number of subscribers; and 4) the total number of subscribers with 36 or more activated channels."

The FCC also adopted, but did not release, a Notice of Inquiry (NOI) that requests comments to assist it in preparing its 14th annual report to Congress on the status of competition in the market for the delivery of video programming.

FCC Commissioner Robert McDowell offered his assessment of the events leading up to this point. He wrote in his statement [PDF] that "it appeared that the Commission was going to ignore a mountain of evidence from independent analysts and prior Commission findings to favor a solitary study. According to press accounts, sometime in October, this lonely study was solicited over the phone from Warren Communications by a FCC staffer. A day or two later, the draft Report was circulated and arrived at a conclusion that was a radical departure for the FCC: that the cable industry had surged past the 70/70 threshold outlined in Section 612(g) of the Act in just one short year."

He continued that "To reach this previously unattainable figure, the Commission was prepared to omit, or as some have said suppress, the FCC’s own data as gathered from cable operators on Form 325 in favor of a study that was inserted into the record just last month without the benefit of public notice, scrutiny or comment. The author of this suddenly dispositive analysis says that it should not be used for the 70/70 test due to large gaps in its evidentiary foundation. But the Commission was prepared to do so anyway because this flawed anomaly was the only fig leaf that could be found in an attempt to trigger an avalanche of unnecessary regulation to cascade down upon an otherwise competitive industry."

Commissioner Jonathan Adelstein joined with McDowell in opposing Chairman Martin's initiative. Adelstein wrote in his statement [PDF] that the FCC must base its market analysis on the facts, not policy objectives. "In order to base our decision on the facts, Commissioners need access to all the facts. Unfortunately, the most important data we have -- the FCC's own numbers -- were suppressed from the Commissioners until the last minute. I did not learn until after 7:00 pm last night that the FCC’s own 2006 survey found that only 54 percent of homes passed subscribe to cable. Similarly, the FCC's cable price survey came in at 55.2 percent penetration. Based on these newly unearthed facts and the conflicting evidence on the record, I am unable to support a finding that 70 percent of homes passed subscribe to cable at this time."

Martin wrote in his statement [PDF] that "I would have been comfortable relying on the data submitted by Warren". He wrote that "Several commenters, including CFA, MAP, and AT&T, argued that the test has been met. Others, primarily the cable industry, argue it has not been met."

FCC Commissioner Michael Copps backed Martin's play. He wrote in his statement that "I simply can't see how American consumers benefit when a handful of vertically-integrated media giants have so much control over so much content. This industry structure provides precious little space for the creative genius of independent content producers and artists. And it has led to prices that continue to rise far faster than inflation."

He added that "I have also been troubled by the approach of the FCC's annual video competition report, which I think has unreasonably minimized the harm that increased consolidation has visited upon the American consumer."

The report to the Congress is FCC 07-206 in MB Docket No. 06-189. The NOI is FCC 07-207 in MB Docket Number 07-269.