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from: NY Times

November 28, 2007
Cable Wins Compromise on F.C.C. Plans

By STEPHEN LABATON
WASHINGTON, Nov. 27 — In the face of a lobbying blitzkrieg by the cable television industry, the Federal Communications Commission drastically scaled back Tuesday evening a proposal by the agency’s chairman to more tightly regulate the industry, as a way to salvage the effort.

The compromise was a significant, though not total, victory for the cable industry, whose executives and lobbyists had worked to erode support on the commission for the agenda of the chairman, Kevin J. Martin. Among other things, the commission agreed to postpone for months the decision Mr. Martin had hoped would be made on Tuesday about whether the cable television industry had grown so dominant that the agency’s regulatory authority over it should be expanded.

But Mr. Martin and some consumer groups insisted that the decisions by the commission could nonetheless help to make programming more diverse and ultimately reduce cable costs.

One of the new rules adopted on Tuesday, for instance, would make it significantly less expensive for independent programmers to lease channels.

At an acrimonious two-hour hearing that ended shortly before midnight, Jonathan S. Adelstein, a Democratic commissioner, and Robert M. McDowell, a Republican commissioner, criticized the process leading up to the votes, and suggested that Mr. Martin had relied on misleading data — and suppressed more reliable data already in the commission’s hands — about the cable industry’s reach to justify his regulatory agenda.

Mr. Martin disputed them, saying that the F.C.C.’s own data was not reliable, and that the most reliable data available showed that the industry had grown so large that greater regulation was justified. He said no data was suppressed.

Industry executives and their lobbyists were relieved by the outcome.

Kyle McSlarrow, the president and chief executive of the National Cable and Telecommunications Association, the industry’s most powerful trade group, said that the commission’s decisions “sends an important message that consumers are best served by marketplace forces, not government micromanagement.”

As part of the lobbying effort, top cable executives and lobbyists met last week with senior White House officials. Two lobbyists involved in those meetings said on Tuesday that they included Joshua B. Bolten, the chief of staff; Allan B. Hubbard, the president’s top economic adviser at the White House; and Joel D. Kaplan, the deputy chief of staff and a longtime friend of Mr. Martin’s.

A White House spokesman did not return a call seeking comment about the meetings or about whether any officials had contacted the commission.

Politically, the compromise enabled Mr. Martin to say that he had won something for consumers, although the fight showed that he had lost considerable support from both Democrats and Republicans both at the commission and in Congress.

“As a package, these are all important steps,” Mr. Martin said in an interview Tuesday evening shortly before the commission vote, referring to both the cable provisions and others the agency adopted, including one that extended the Do Not Call registry for five years and another to enable small lower-power radio stations to more easily get on the airwaves.

Mr. Martin is a rare Republican appointee of President Bush who has not been afraid to impose stiff regulations where he says there are market failures. In the case of the cable industry, he has complained about increasing prices, vulgar programs and market tactics that he has said have discouraged competition from other paid television providers.

In the process, he has alienated cable television executives, who have complained to senior White House officials and lawmakers that Mr. Martin had overreached. They say that he has sought to change the business models of the industry’s largest players in an ill-advised effort to help the telephone companies, which have begun to challenge the cable industry by offering their own paid television service.

Besides the measures on industry dominance and access for independent programmers, Mr. Martin had proposed to set up a new complaint procedure that would impose arbitration to resolve disputes between the cable operators and broadcasters like the NFL Network and the Hallmark channel. But he abandoned that after it became clear on Tuesday morning that he did not have the support he had originally expected.

A third proposal, to make it less expensive for independent programmers to lease access to channels, was approved 3 to 2, with Mr. McDowell dissenting. But it will be delayed from going into effect until early next year.

Mr. Martin had thought earlier this month that he had the support of two of the agency’s Democrats for his original proposals, which would have given him a majority of the five-member agency. The commission’s two Republicans had in varying degrees publicly questioned some of the proposals, and they were expected to support the industry..

But after the recent lobbying barrage, Mr. Adelstein, who is up for renomination soon, began to express reservations about the proposals.

Republicans in the House and Senate sent letters to Mr. Martin echoing the industry’s concerns, as did senior cable television and network executives.

The proposal that drew the most fire was a finding that the industry had become so dominant that the agency should have expanded powers to impose more regulations.

Mr. Martin had called for the agency to invoke this authority under the so-called 70/70 rule of the Cable Communications Act of 1984. Under that provision, the agency may adopt any rules necessary to promote “diversity of information sources” if the commission concludes that cable television is available to at least 70 percent of American households and that at least 70 percent of those households actually subscribe to a cable service.

That finding would provide the legal basis for the commission to adopt rules aimed at increasing programming and reducing rates for consumers and to put a cap that would prevent more growth by the nation’s largest cable company, Comcast.

The data originally used for the finding was based not on direct numbers from companies, but on surveys by industry analysts. Under the compromise, cable companies will have two months to submit the numbers of customers and size of their markets, which the agency could use next year to determine whether the industry had reached the threshold for more regulation.

Mr. Martin had moved forward even though he did not appear to have the support of his two Republican colleagues, in the hopes that he could gain support from the two Democrats at the agency. Consumer groups said they had received what they took to be unambiguous commitments from the Democratic commissioners to give Mr. Martin a majority.

But in recent days, Mr. Adelstein, disputed that he had given the groups a firm commitment.