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ACA Agrees With FCC: Cable Operators Are Subject To Effective Competition

Adoption of Presumption Of This Fact Not Inconsistent With Intent Of Congress, Trade Group Says

PITTSBURGH, April 13, 2015 - The American Cable Association strongly supports the Federal Communications Commission's intention to presume that all cable operators today face effective competition in the delivery of traditional pay-TV services from at least two major multichannel video programming distributors (MVPDs) and that many cable incumbents operate in markets served by up to four MVPDs.

The FCC action would mean hundreds of ACA members operating thousands of cable systems could skip significant filing costs to document competitive conditions to the FCC when everyone knows DirecTV and Dish Network blanket the country, including Alaska and Hawaii, with robust packages of pay-TV programming.

"ACA applauds the FCC for seeking to update its regulations in response to demonstrable evidence that the market conditions that existed in 1992 to justify regulation of cable operators are no longer present," ACA President and CEO Matthew M. Polka said. "With consumers offered an array of choices not only from traditional MVPDs but also from Over-The-Top providers like Hulu and Netflix, it is hard to believe that federal rules would presume NO effective video competition exists in today's markets."

ACA set forth its views in comments filed April 9 as participants in a rulemaking in which the FCC has tentatively concluded there should be a rebuttable presumption that all cable operators are subject to effective competition. Under the FCC's plan, state and local regulators would shoulder the burden of demonstrating the absence of effective competition before having the right to regulate basic/broadcast tier rates, as opposed to current rules that require cable operators to document effective competition based on service and subscriber take rate metrics established in federal law and regulations.

The FCC's rulemaking was mandated by Congress in Sec. 111 of the STELA Reauthorization Act calling for the streamlining of the effective competition petition process for small cable operators. ACA supports the FCC's view that putting the burden of evidence production on the cable franchising authority represents a perfect exercise of the FCC's authority in fulfilling its obligation to implement Sec. 111.  ACA further noted that nothing in Sec. 111 or elsewhere in the Communications Act prevents the FCC from adopting such a presumption for all cable operators, a position ACA supports.

Under current rules, cable operators that believe they face effective competition can establish this fact under any of four separate tests.  One of these tests is the "competitive provider" test that requires cable operators to show in an FCC filing that it and at least one competitor offer service to at least 50% of local households and that the competing MVPD or MVPDs serve more than 15% of the area's pay-TV subscribers. This "competing provider" test was adopted before DirecTV and Dish entered the business and when cable competitors served less than 5% U.S. households.

Nationally, the two DBS providers today serve 26% of all households and have 34.2 million subscribers combined. It is hardly surprising that hundreds of effective competition petitions based on the competing provider test have been approved.

ACA said that the FCC should not rely on the competing provider test only. It urged the agencyto adopt a rebuttable presumption that cable systems serving communities in which a Local Exchange Carrier (LEC) is offering MVPD service are subject to effective competition.

For small cable operators in particular, the task of obtaining the competitively sensitive information that the FCC relies on in determining whether a LEC is providing effective competition can be daunting.  Yet, as a practical matter, the facts typically support such a finding.  Thus, the FCC has not denied a LEC-test based effective competition petition showing - which does not require documenting subscriber-penetration - since at least 2013.

"ACA believes adoption of these long overdue reforms will bring the FCC's rules into conformance with current marketplace realities and, with respect to small cable operators, carry out Congress' specific mandate of late that the FCC streamline the effective competition petition process," Polka said.

About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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