As expected, the FCC adopted a Report and Order (R&O) on Wednesday reversing the agency’s long-standing rebuttable presumption that effective competition does not exist in the U.S. cable market.  In accordance with Section 111 of the STELA Reauthorization Act of 2014 (STELARA), the FCC’s five commissioners decided unanimously to apply a rebuttable presumption in favor of effective competition to small and rural cable operators.  In an unusual and noteworthy development, however, Commissioners Mignon Clyburn and Jessica Rosenworcel split from their Democratic colleague, FCC Chairman Tom Wheeler, in dissenting against rules that apply the new presumption in favor of competition to the entire cable industry. 

Wednesday’s R&O reverses a presumption against effective competition that has stood since 1993, when cable operators dominated the U.S. multichannel video program distribution sector with a 95% market share.  Since that time, cable’s share of that market has shrunk to just over 50%, and the FCC has approved 99% of petitions filed since 2013 for findings of effective competition.  As he remarked that the FCC has recently “been able to watch real world examples of what happens when cable rate regulation is removed,” FCC Chairman Tom Wheeler cited recent cable price data that shows “the average rate for basic service is lower in communities with a finding with effective competition than in those without such a finding.”  Addressing critics, Wheeler added: “there has been no evidence in this proceeding to suggest that our previous findings of effective competition . . . led to any changes in tier placement of local broadcast stations.”

Endorsing the R&O, FCC Commissioner Ajit Pai proclaimed that the new presumption in favor of competition “far more accurately reflects the current state of the video marketplace than did its predecessor.”  The National Cable & Telecommunications Association agreed that “growth in competition over the past two decades provides clear evidence that the effective competition threshold established by Congress has been met and surpassed.”  Commissioners Clyburn and Rosenworcel, however, voiced concern that the decision to apply the new presumption to the entire cable industry exceeds the intent of Congress in adopting Section111 of STELARA.  Arguing that the R&O “clearly contradicts language expressly written into statute,” the National Association of Broadcasters termed it “disappointing and surprising that . . . the FCC believes it is wise to gut the one protection that allows local municipalities a chance to protect consumers.”