Though it’s late in the Bush administration, it’s still a bit too soon to discount Kevin Martin, chairman of the Federal Communications Commission and cable-industry nemesis for the past three years.
Martin, who probably exits office in early 2009, can’t be called a lame duck just yet. That’s because his agency still has some big issues to decide, including some worth hundreds of millions of dollars to cable.
“We have a very busy, packed substantive agenda before the commission between now and December on a lot of issues,” said Medley Global Advisors telecommunications analyst Jessica Zufolo.
NO ELECTION-YEAR LULL
Presidential election years have a tendency to slow activity at the FCC, which is run by five White House political appointees confirmed by the Senate.
But this year could be different, one Washington, D.C., telecommunications lawyer said.
“I think [Martin’s] going to get some business conducted,” said attorney Robert Rini, a partner at Rini Coran. “My sense is that where he’s got the votes, he’s going push his agenda forward until the very end.”
High on Martin’s agenda is concluding action on the merger between XM Satellite Radio and Sirius Satellite Radio, a deal which cleared the Justice Department without conditions in late March. Other priorities include the re-auction of public-safety spectrum and the smooth execution of the digital TV transition test in Wilmington, N.C., on Sept. 8.
Since being named chairman by President Bush in March 2005, Martin has repeatedly tangled with cable on a range of issues. The clash so far has produced 10 federal lawsuits filed by cable operators, cable programmers or the National Cable & Telecommunications Association.
In the months ahead, more conflict could surface as Martin has publicly refused to devote nearly all of his remaining time to the nationwide DTV transition on Feb. 17, 2009.
Martin has an opportunity to decide how cable operators manage their broadband networks and how much they must pay to attach their wires to telephone poles. He could also attempt to remake the programming landscape by capping monthly wholesale cable-network fees at 75 cents, unless the networks want to forfeit carriage on expanded basic.
POSSIBLE SCENARIOS
And no one in cable can ignore the possibility that Martin might try to force cable operators to make more of their video channels available to competitors, or require cable operators to carry multiple digital-programming services beamed by local TV stations.
“I can’t imagine Martin backing off,” said Burt Braverman, a cable attorney at Davis Wright Tremaine in Washington, D.C.
FCC Republicans hold a 3-to-2 edge over the Democrats. Regulatory restraint normally associated with Republican institutional control hasn’t been the norm at the FCC under Martin, because he has routinely voted with the two Democrats to regulate cable.
“Martin’s been reaching across the aisle to forge his consensus. I don’t see him slowing down,” Braverman added.
Martin now has the FCC deeply engaged in investigating Comcast’s broadband network management practices in the wake of complaints that Comcast has been blocking BitTorrent file-sharing users.
ACCUSING COMCAST
At public forums at Harvard Law School and Stanford University, Martin repeatedly accused Comcast of blocking peer-to-peer Internet traffic despite the fact-finding purpose of the events. Comcast has consistently denied blocking. It said it delayed BitTorrent traffic, uploads in particular, to reduce congestion at peak hours. Although Comcast sent a representative to Harvard, it declined to provide a witness at Stanford.
Martin and Comcast also sharply disagree on whether the FCC even has the authority to enjoin Comcast from delaying P2P traffic. Citing Martin’s own statement in August 2005, Comcast maintains that the agency’s Internet policy principles are unenforceable and allow reasonable network-management practices.
Medley analyst Zufolo believes that the FCC won’t slap Comcast with a big fine. Instead, she sees the agency demanding that broadband-network owners disclose more clearly their treatment of file-sharing applications, making Comcast the poster child for inadequate consumer notification.
“It seems that the commission is going to take some action on the BitTorrent complaint regarding network management behavior of Comcast,” she said. “It could be something more general that addresses the issue of disclosure.”
A sleeper issue for cable is the FCC’s pole-attachment proceeding, in which the agency is proposing to hike cable’s fees by hundreds of millions of dollars annually. An NCTA-funded study by Microeconomic Consulting & Research Associates (MiCRA) concluded that the FCC’s proposal “could raise the price of providing broadband services by up to $670 million each year.”
The FCC regulates the price cable operators pay the pole owners, who include phone and power companies. Cable pays less than telecommunications companies under the FCC’s pole-attachment formula. Martin is proposing a uniform rate for broadband providers and, in doing so, he would increase cable payments rather than reduce the rate charged to telecommunications providers.
The FCC’s proposal “to raise pole-attachment rents for cable operators who provide broadband Internet access would constitute a massive wealth transfer from consumers of broadband Internet and competitive facilities-based voice services to utility companies who have long abused their monopoly over poles,” Comcast told the FCC.
The United States Telecom Association said its telephone-company members are getting gouged by utility-pole owners.
“On average, [incumbent phone companies] surveyed pay more than eight times what cable providers pay per attachment, and almost six times the rate paid by [new entrants],” USTA told the FCC in March.
The pole attachment could involve so much money and prove so controversial that it outlasts Martin.
WHEN WILL HE GO?
Predicting Martin’s departure date has become something of a parlor game among the telecommunications elite inside the Beltway.
If Sen. Barack Obama (D-Ill.) or Sen. Hillary Clinton (D-N.Y.) is elected president in November, the new Democratic president could replace Martin immediately after taking office in January.
A victory by prospective GOP nominee Sen. John McCain (R-Ariz.) could give Martin a few extra months in the job to allow the McCain administration to line up its appointees and get them confirmed by the Senate.
“It’s going to take a while to get a Republican appointed and confirmed in what’s likely to be a heavily Democratic Senate,” said Andrew Jay Schwartzman, president of the Media Access Project, a public-interest law firm. “McCain does not have a lot of reason to want to push Martin out.”
A McCain campaign insider — who declined to be named — said to expect a new FCC chairman in a McCain administration.
“Knowing Sen. McCain, he will want to appoint his own team,” the McCain campaign member said. “That’s not to say Kevin doesn’t stay there for some interim period of the transition. My gut feeling is that the senator would appoint his own team.”
