WASHINGTON -Even though the cable industry has secured an important regulatory victory from the Federal Communications Commission, it's still got a fight on its hands to avoid mandatory carriage of both analog and digital broadcast-TV signals.
Last week, the FCC announced it would not require cable operators to carry both signals, but it promised to revisit the issue after collecting channel-capacity data from cable operators in the process of upgrading their systems.
Until further notice, commercial-TV stations may elect either must-carry or retransmission consent for analog signals, but only retransmission consent for digital signals. Electing must-carry for digital signals but retransmission consent for analog ones is impermissible.
Digital-only TV stations are entitled to must-carry in analog or digital form. Public broadcasters do not have must-carry for their digital signals.
TV stations are free to demand carriage for the digital signal in analog-carriage negotiations. The FCC pledged to monitor whether the bundling of analog and digital has an anti-competitive impact, especially on small operators.
Although the FCC voted 4-1 to approve a range of digital-TV rules, the vote was 3-2 to indefinitely postpone action on dual must-carry.
Notably, for cable to prevail, it required Democratic FCC chairman William Kennard to team up with Republicans Michael Powell and Harold Furchtgott-Roth for the first time on a major issue in Kennard's three years of leading the agency.
The decision to postpone dual carriage, which was rooted in concerns about an invasion of cable's First Amendment free-speech rights, was adopted one day before Kennard resigned on Jan. 19. But the order was not released until Jan. 22, the same day President Bush designated Powell as the new chairman.
In the order, the FCC ruled on another issue almost as important as dual carriage. The agency said that when cable operators carry DTV signals pursuant to must carry, they are required to carry no more than the station's "primary video" signal and other program-related content.
That decision effectively buried the dreams of some broadcasters that planned to place four or five programming services-and perhaps even some data offerings-on cable systems.
"It wipes away a business plan and hurts diversity. It certainly makes you take another look at datacasting as a revenue stream," said Lowell W. Paxson, chairman of Paxson Communications Corp., owner of 67 local TV stations that are totally reliant upon must-carry to reach cable subscribers.
Paxson filed must-carry complaints against 13 cable operators in Chicago. He wanted analog carriage for his primary digital signals and digital-tier carriage for five multicast services. The FCC dismissed the complaints last week.
A broadcast-industry source said it was unlikely that TV stations would appeal the dual carriage decision because it was not a final action.
The decision on multicasting, by contrast, was final, and allows parties to seek FCC reconsideration or take their chances in federal court.
"That's a decision. That would be appealable. I think there is going to be a lot of stuff in there we wind up seeking reconsideration on," a broadcast-industry source said.
As a concession to broadcasters, the FCC launched a new rulemaking to flesh out the meaning of "program-related content" and to decide whether its tentative conclusion that dual must-carry violates the First Amendment would remain valid as the channel capacity of cable systems increases.
FCC sources said the agency would survey 16 cable operators-12 large, two small and two overbuilders-to collect channel-capacity data and to determine the extent to which DTV stations are being carried pursuant to retransmission consent.
About 80 percent of TV stations currently rely on retransmission consent.
In a statement, Powell said denying dual carriage was consistent with the law and he recommended that broadcasters lobby Congress for dual carriage, "given that the statute clearly did not contemplate must-carry in a digital world."
Furchtgott-Roth issued a statement indicating dual must-carry was not authorized by law, adding that TV stations were entitled to carriage of one signal whether delivered "in analog, digital, Morse Code, or any other conceivable technology."
Democrat Ness disagreed with the present ban on dual carriage, claiming that to reach such a conclusion before the facts on cable capacity and retransmission consent were known was "gratuitous."
"The majority should not form an opinion, even a tentative one, without first considering such fundamental data," Ness said in a statement.
She insisted her view should not be read to mean that she had made up her mind on dual carriage, particularly in light of concerns raised by cable programmers that fear being dropped.
That said, Ness stressed that DTV stations that don't get cable carriage might find a "place in the history books along with the passenger pigeon."
Democrat Gloria Tristani voted against the order, finding fault with the narrow definition of "primary video" and the decision to examine further the definition of "program-related."
Tristani also expressed annoyance that the FCC rushed to finish the order in the waning moments of Kennard's tenure.
"I hope in any future proceedings that reflective deliberation, rather than student-like cramming, characterizes our processes," Tristani said.
In the ruling, the FCC detailed important findings that could establish the legal basis for dual carriage within a short time. The fact that the agency is continuing to examine dual carriage left many in cable's ranks with a queasy feeling.
C-SPAN TAKES TO WEB
"It could have been better, and we don't think we are out of the woods yet," said Bruce Collins, vice president and general counsel of C-SPAN. "It provides another forum for the broadcast industry to try to change the law."
In an effort to create an archive about its most important regulatory issue, C-SPAN two weeks ago established a new Web site-www.mustcarry.org-filled with news articles, company comments, and government documents on the issue of mandatory cable carriage of DTV signals.
Weather Channel CEO Decker Anstrom, who was president of the National Cable Television Association when the FCC launched the dual-carriage rulemaking in July 1998, said the "fight is not over."
But he said the agency's recognition of First Amendment harms to cable "suggests that the FCC will not feel the need to address this issue for a couple of years."
During the last 30 months, the National Cable Television Association has asserted that the FCC had no legal authority to require dual must-carry.
The trade group also claimed that no DTV station was entitled to must-carry until broadcasters generally had returned their analog spectrum. NCTA lost on both counts.
In the 91-page order, the FCC concluded that the federal law neither barred nor compelled dual carriage, meaning the agency thinks it has discretion to make either call.
"It is our view, having deliberated extensively on this question, that neither of these views prevail," the FCC explained in a further notice attached to the order.
That holding was also bad news for broadcasters, which had claimed the FCC had no choice but to require dual carriage.
"We strongly believe there is a congressional mandate for cable carriage of analog and digital broadcast signals," said National Association of Broadcasters president Edward Fritts said in a statement that claimed the battle at the FCC "is far from over."
The FCC addressed NCTA's second point by ruling that digital-only TV stations could assert must-carry rights before the conclusion of the transition in 2006.
In a Jan. 18 decision, the FCC said digital-only WHDT-DT in Stuart, Fla., could immediately demand cable carriage in either analog or digital form. The FCC said it would review in 2003 whether to continue to permit analog carriage of DTV signals.
The impact of must-carry on digital-only stations won't be that severe. About three digital stations are operating at present; roughly 30 more are in the pipeline. That represents 2.3 percent of all commercial TV stations.
But those stations have a right to displace analog cable networks.
NCTA is studying whether to challenge the FCC's ruling that digital-only stations are entitled to analog must-carry prior to the end of the analog-to-digital transition on Dec. 31, 2006, or until 85 percent of households in a market have digital-reception equipment.
The FCC declined to impose dual must-carry based on First Amendment concerns raised by cable programmers that fear being dropped from or denied access to channel-locked cable systems.
The agency did not address cable's Fifth Amendment concerns relating to the taking of private property without just compensation.
To the extent the FCC would impose dual carriage, the agency said its regulations need to conform with the factors contained in the Supreme Court's 1997 approval of analog must-carry.
In broad terms, the court required that the benefits of mandatory carriage must outweigh the speech burdens on cable operators and programmers.
The FCC said its decision to examine whether broadcasters are gaining dual carriage through retransmission consent-and whether the addition of cable channels can readily accommodate dual must-carry-could serve as the empirical predicate for imposing or denying dual must-carry at some point.
"We believe that more evidence is necessary because the Supreme Court sustained.analog broadcast-signal carriage requirements against a First Amendment challenge principally because Congress and the broadcasting industry built a substantial record of the harm to television stations in the absence of mandatory analog carriage rules," the FCC said.
In a statement last week, NCTA president Robert Sachs said he hoped the FCC's fact-finding effort would result in a decision that dual carriage was unnecessary.
"As the [FCC] seeks additional information to complete the record, we are confident it will confirm the [FCC's] initial conclusions. In the meantime, the cable industry will continue to work with broadcasters and others to find market-driven, not government-dictated, mechanisms to advance digital TV," Sachs said.
Linda Moss contributed to this report.
