FCC Chairman Kevin Martin has long had it in for the cable industry, for unknown, baffling reasons. But earlier this month Republican Martin raised the stakes in his war with cable by proposing a new set of ownership regulations that cap how many customers any given cable operator can serve. This perplexing pro-regulatory stance is at odds with Martin's generally conservative world view and runs counter to his proposed deregulation when it comes to newspaper and broadcast station cross-ownership requirements.
Martin claims that an obscure provision in the 1984 Cable Act, the so-called 70/70 rule, justifies his new clamp-down. The 70/70 rule is found in the leased access section of that bill and basically says that the FCC can enact rules needed to promote "diversity of information sources" if cable television is available to at least 70% of American households and at least 70% of those households actually subscribe to a cable service.
Martin thinks he's found a new weapon to hurt the cable industry with in this 70/70 rule and has been pushing the idea of new regulations based on his contention that more than 70% of capable households now subscribe to cable (as opposed to DBS satellite or telco-delivered multichannel video services.) But, setting aside the fact that the 70/70 rule relates to leased access (i.e. allowing third parties to lease capacity on a cable system) and not to ownership caps, Martin is, um, astoundingly and provably wrong on the 70% threshold finding.
He's right that 70% of U.S. homes are capable of buying video service from cable -- the statute stipulates that the 70% has to be cable systems with a greater than 35-channel capacity, which in all likelihood is almost totally synonymous with all cable systems today. As the table at the end shows, the top cable operators alone, which account for virtually all cable service in the U.S. today, passed 111.95 million homes at the end of Q3 07, representing about 97% of all households in the U.S.
But, as the table also shows, these operators served only 56.87 million basic video customers, representing only about 51% of all homes passed. Not even close to the 70% threshold.
Cable operators don't even represent 70% of all multichannel video customers, as the table at the end shows. (Most of these data came from the companies' quarterly financial reports, which are submitted to the SEC.) At best, cable companies serve about 65% of all video customers, with DBS providers and telcos grabbing the remaining market share.
So, what is Martin talking about? Turns out he surreptitiously asked a DC-based newsletter vendor, Warren News, to submit data from a yearbook that Warren has long published. "The TV Cable Factbook" used to be a bible in the broadcast world and it is based on surveys of individual cable systems and TV stations. Despite Warren's first-rate news coverage, the Factbook is widely known to be inaccurate or incomplete to the degree that it is just not useful for statistical analysis.
Each year fewer and fewer systems (and TV stations) answer Warren's questionnaire, so a lot of data goes missing, or is pulled forward from earlier years and thus instantly out-of-date. According to the Factbook data, U.S. cable operators pass only around 96 million households, which is clearly wrong, out-of-date, unreliable.
There are plenty of other sources of more reliable data out there, but the Chairman is apparently sticking solely to this one set of flawed data to justify his new regulatory campaign. Speaking today at a Media Institute lunch, Martin's fellow Republican Commissioner Robert McDowell expressed his own embarassment over the Chairman's crusade in light of the hand-picked and flawed data used to justfiy it.
"Why is the FCC suddenly changing its evidentiary standard?" McDowell asked. "I'm searching for the answers to those and other questions to no avail."
If I were Kevin Martin I'd feel bad about myself if the only way I could justify a regulatory push were to rely on one set of questionable numbers while ignoring all the rest. (Even Warren Publishing has noted that its data can't be used by Martin for this purpose.) I'd be red-faced that such a high-profile attack on an irrationally hated industry were so easily undercut with a mere glance at more reputable data sources.
Based on chatter I picked up today, Martin is likely chagrined that he rushed out of the gate so unadvisedly. The smart money is betting that Martin quietly buries this wacky proposal.
Cynthia Brumfield at 4:24 PM|Comments(0)
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