Consumer Protection for Cable Television But Not the Internet or Cellular Telephony

The FCC recently released an Order that extends until Oct. 2012 a prohibition on exclusive contracting by vertically integrated programmers who deliver video content via satellite. See Implementation of the Cable Television Consumer Protection and Competition Act of 1992, Development of Competition and Diversity in Video Programming Distribution: Section 628(c)(5) of the Communications Act: Sunset of Exclusive Contract Prohibition, MB Docket No. 07-29, Report and Order (rel. Oct. 1, 2007), available at: http://fjallfoss.fcc.gov/edocs_public/attachmatch/FCC-07-169A1.doc.

Section 628(c)(2)(D) of the Communications Act requires the FCC to safeguard consumers and video programming competition from vertically integrated programmers who the Commission determines still have the ability and the incentive to favor the operators with whom they are affiliated over other competitive providers. In light of the FCC’s determination that vertically integrated ventures still control, “must see” content, for which no viable substitute exists, the Commission retained the prohibition against exclusive content distribution contracts from ventures that verticially integrate content production and distribution to consumers.

This order shows the FCC in a curiously pro-consumer, market interventionist mode, quite an opposite posture vis a vis network neutrality and the Commission's typically pro-marketplace mindset. Why is this?

First there is a statutory mandate to assess the market for content by multi-channel video programming distributors. The Commission sees an ongoing market failure even as it nearly always determines that robust competition and a well oiled marketplace exists everywhere else. So a statutory mandate to examine industry conditions typically does not trigger a pro-regulatory oversight outcome.

Second perhaps there is something about television--particularly "must see" television--and voters attitudes that forces the Commission to act. Exclusive access to via cable television of a much loved program surely will trigger consumer outrage particularly if the exclusive supplier charges what an inelastic market will bear.

Third this is an issue about vertical integration by companies consumers and apparently FCC Commissioners love to hate--cable.

So take away an explicit Congressional mandate, address content perhaps even "must see" video and substitute much beloved (or feared) telephone companies and the FCC has no problem with vertical integration, exclusive contracts for content and walled gardens. The market fails for "must see" video via cable television, but the FCC has no problem whatsoever for any exclusive content deal, including video, via the Internet and cellular telephones. IPTV and cellular telephone display of video is not cable television, but it increasingly will compete with it.