Cable Companies under Regulatory Siege?

FCC_New_LogoEarlier this year Michael Powell (the head of the National Cable Television Association) complained that the FCC has launched a regulatory assault again cable companies – and in some ways he is probably right. Some of the regulations ordered or contemplated are clearly aimed at cable companies – yet much of the new regulation was aimed at somebody else but still affects the cable companies.

Consider all of the changes affecting the cable companies right now:

  • Net neutrality has meant that cable companies and other ISPs can’t make lucrative deals with content providers to bundle content as part of broadband access.
  • But the biggest change from the net neutrality order is the advent of Title II regulation of the internet. This is resulting in a raft of new regulations for broadband. All of a sudden the FCC is looking at data caps. The agency has demanded that all ISPs disclose all of the details of their broadband connections to customers. Cable companies are suddenly covered by customer privacy regulations – the biggest being that they probably can’t use the information they gather as an ISP without a customer’s approval.
  • The cable companies have become huge sellers of broadband transport and data pipes to businesses. The FCC is about to make major changes in the special access market and that is likely going to lower prices for these products. Special access rates are incredibly high and cable companies and CLECs have made a living out of selling services to businesses at a discount from the published special access rates. The result is that businesses pay a gigantic premium for dedicated broadband connections, and everybody expects the FCC to lower rates across the market.
  • The FCC’s move to somehow eliminate settop boxes is aimed right at the cable companies. To a large extent the industry brought this on themselves as they’ve raised rates to rent a settop box from $5 to $10 or more in most markets. But the idea that there can be some sort of generic solution that can work on every type of network sounds idealistic, at best.
  • The FCC seems to want to allow anybody to carry video content on the Internet without saddling the new providers with the same rules that govern cable companies. So cable companies, for now, are stuck with rules that force them to offer certain kinds of tiers of service while OTT providers can cook up any creative package they can cobble together.

As a telecom guy I find this all to be somewhat ironic. I remember when I first read through the Telecommunications Act of 1996 that my first reaction was that the FCC had let the cable companies completely off the hook. The big telcos were being forced to unbundle their networks to offer voice loops and DSL connections while the cable companies had no corresponding obligation to unbundle for cable modem connections. In the decade following the Act, most state Commissions also excused cable companies from most forms of voice regulation. The cable companies were able to somehow characterize the voice on their networks as VoIP and got out of most voice regulations – but from a customer perspective the cable voice product was indistinguishable from telco voice products. It’s one of the first times that the FCC made an exception for a product based upon the technology used to deliver it – a trend that has since led to some very odd regulatory rulings.

So now it seems that the wheel has turned and the cable companies are being brought back into the regulatory arena with everybody else. I think Powell is right and those in charge of a cable company must feel like they are under regulatory siege. But except for the settop box issue, which is an odd set of regulations clearly aimed at the cable companies – the other regulations can mostly be described as leveling the playing field – something that the cable companies have always said should apply to municipal broadband providers.

But from a regulatory perspective the protections provided to consumers ought to be the same across all broadband technologies. It makes a lot of sense to finally require cable companies to provide privacy protection and to disclose the details and terms of the products they are selling. I have to laugh once in a while about regulation. Five years ago a colleague of mine said he could foresee the end of telecom regulation. But I countered by saying that regulators like to regulate, and sure enough it seems like we have as many – or more! –  regulations today as ever.

3 thoughts on “Cable Companies under Regulatory Siege?

  1. Though I won’t dispute the “regulators need to regulate” line – I think the movement to more regulation is from the utter failure of competition to discipline the cable companies because thus far, they have not faced any real competition and have been abusing subscribers. I don’t see this as regulation for regulation’s sake. And I say that as someone who is not a big fan of heavy-handed regulation because I think it is ultimately gamed by an industry as consolidated and powerful as cable. But we can’t just let the cable cos write the rules of the (mis)information age.

    • I don’t disagree with you. What I’ve seen over the course of my career is that, like with many things in life, things ebb and flow. We’ve had periods of ‘heavy’ regulation followed by periods of lighter regulation, mostly driven by the administration that is in power at a given time and the lobbying power of the cable companies or telcos being regulated.

      The cable companies got repeatedly off the hook in past decades due to their influence over the regulatory and legislative process. The whole idea, for example, of treating voice over a cable copper network as different than voice over a telco copper network was purely driven by politics and lobbying and not by any regulatory principle, by technology or even by common sense.

      But we are now in a period where the pendulum is swinging back the other way. There was a time when big cable companies were the darlings of the telcom world- customers loved them, Wall Street loved them and lawmakers loved them. But huge yearly rate increases and the worst customer service among all industries has changed the public perception of them, which has to be part of the reason for the new surge or regulation.

    • One can’t expect competition to reign in providers unless it’s truly a competitive market with many sellers. Telecommunications isn’t a competitive market but rather a natural monopoly market. Title II is predicated on this fact. That’s why it includes universal service and a bar on redlining because without these requirements, we end up with the infrastructure disparities that are so prevalent today. The question going forward is now that regulators have adopted Title II deeming telecom a common carrier utility is will we see it enforced?

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