Citing the vast changes in the U.S. multichannel video marketplace since the implementation of the 1992 Cable Act, the FCC voted unanimously this week to launch proceedings on proposed revisions to the FCC’s rules that would shift the statutory burden of proving “effective competition” from the cable industry to local franchise authorities (LFAs).  If the change is adopted, the FCC said LFAs “would be required to demonstrate to the Commission that one or more cable operators in its franchise area is not subject to effective competition if it wishes to regulate cable service rates.”  

Since 1993, and in accordance with Cable Act provisions, the FCC has applied a rebuttable presumption to cable operators that effective competition does not exist in the U.S. multichannel video program distribution (MVPD) market.  As such, cable operators seeking relief from LFA basic rate regulation must demonstrate that effective competition exists as shown by the presence of (1) two unaffiliated MVPDs in the franchise area which offer “comparable programming to at least 50 percent of the households in the franchise area,” and (2) one or more MVPDs, not including the largest MVPD in the franchise area, that serve more than 15% of the households in that market.  

The Notice of Proposed Rulemaking (NPRM) issued on Monday seeks comment on whether the FCC should reverse its rebuttable presumption “and instead presume that cable operators are subject to effective competition.”  In addition to highlighting the availability of direct broadcast satellite (DBS) services that compete against cable operators, the NPRM notes that the cable industry’s share of the total U.S. MVPD market has fallen from 95% in 1993 to 53.9% as of December 2013.  The FCC further states that, since 2013, the agency has granted 224 petitions for findings of effective competition.  Based on these statistics, the NPRM concludes tentatively that “the current state of competition in the MVPD marketplace supports a rebuttable presumption that the two-part test is met.”  

Adding that Section 111 of the recent STELA Reauthorization Act of 2014 requires the FCC “to adopt a streamlined effective competition petition process for small cable operators,” the FCC further stated that “we intend to fulfill Congress’s goal that we ease the burden of the existing effective competition process on small cable operators, especially those that serve rural areas.”