Modern TV Act Would Remove Old Rules, Bring Video Policy Up to Date

The Modern Television Act of 2019 is promising new legislation that would bring federal video policy into greater alignment with 21st century market realities. Introduced in the U.S. House of Representatives on July 25 by Reps. Steve Scalise and Anna Eshoo, the Modern TV Act would repeal or at least reduce a number of old legacy broadcast TV and cable regulations that were based on a now-obsolete picture of the video market. The Modern TV Act is a bipartisan compromise measure that the 116th Congress ought to take up in earnest this year.

Among its provisions, the Modern TV Act would eliminate distant signal importation prohibitions, syndicated exclusivity rules, network non-duplication rules, authority to regulate local cable rates under Section 623, and cable leased access rules. Most of those rules involve dealings between market participants that own video programming and video service providers that distribute programming to retail subscribers. Once those rules are eliminated, video programmers and video service providers can, in most instances, simply negotiate contracts to address which programming receives carriage in which local TV markets. The Modern TV Act also would eliminate, or at least largely eliminate, cable and satellite compulsory licenses for carrying copyrighted video programming, thereby allowing parties to negotiate copyright royalties.

The Modern TV Act moves firmly in the direction of establishing a federal video policy that matches the competitive conditions of today's innovative video marketplace. For several years, Free State Foundation scholars have called attention to the fact that legacy regulations of broadcast, cable, and direct broadcast satellite (DBS) TV services are based largely on early 1990s, or even earlier, assumptions about the analog and VCR-era video market. But those regulations are now hopelessly out of touch with today's marketplace. 

The days are long gone when the video service choices of most Americans were largely limited to over-the-air (OTA) broadcast TV or a single cable operator. Today, most Americans can choose between a cable provider and two DBS providers, while many also have access to a former "telco" video services provider. Unlike the days when cable operators had a 91% market share among pay-TV services, at year's-end 2017, cable served 55.2% of multi-channel video programming distributor (MVPD) subscribers, DBS served nearly 33.5%, and "telco MVPDs" serviced 11.3%. Meanwhile, in 2018 antenna use for OTA broadcast TV reached its highest level since 2005, with 31% of U.S. households having an antenna on at least one TV. Online video distributor (OVD) services have also dramatically transformed the video market. In early 2019, Netflix had over 60 million U.S. subscribers to its streaming video service, while Amazon Prime and Hulu had 101 million and 28 million. Widespread adoption of OVD services has been recognized as an important cause of annual MVPD subscriber losses going back to 2013. Total MVPD subscriptions were down to 94 million at year's-end 2017, and sharp declines have been reported for 2018 and 2019.

Legacy regulations geared toward last century's outdated technologies and less competitive, pre-Internet market conditions confer no benefit on consumers today. Instead, their continuation saddles broadcast, cable, and DBS TV service providers with burdensome compliance costs as well as restrictions that can inhibit their ability to compete with each other and with online competitors. 

Furthermore, as Free State Foundation President Randolph May and I have explained in numerous writings, many legacy video regulations, including leased access rules, amount to forced access mandates. Requiring video service providers to carry video programming not of their own choosing violates their First Amendment free speech rights. The Modern TV Act's proposed repeal of leased access rules would better respect the free speech rights of cable providers. 

To help bring federal video policy up to date, the 116th Congress should give prompt consideration to the Modern TV Act.

STELA Offers An Opportunity for Congress to Clean Out Old Cable Regulations

When Congress has an opportunity to eliminate outdated, unnecessary, and constitutionally problematic regulations, it should consider doing so. Congressional legislation reauthorizing the Satellite Television Extension and Localism Act (STELA) offers just such an opportunity. 

Section 623 of the Communications Act contains basic tier regulations that are relics of a long bygone cable "bottleneck" era. Basic tier rate and must-buy regulations should be eliminated so that federal communications policy can better match today's competitive market conditions. STELA reauthorization legislation constitutes one plausible vehicle to clean out outdated basic tier cable regulations. Congress should keep an open mind about using STELA as a route to regulatory reform.

STELA is considered "must-pass" legislation because it contains the framework for retransmission of broadcast TV content by direct broadcast satellite (DBS) providers. Absent reauthorization, certain provisions regarding broadcast TV, DBS, and cable video will sunset at the end of this year.

Some suggest that Congress should keep the STELA bill "clean." Here "clean" means extending provisions scheduled to sunset at the end of 2014 while avoiding any reforms of legacy video regulation. However, prior STELA reauthorization legislation included a variety of provisions touching on video services. For example, the 2010 bill reauthorizing STELA included directives to the Copyright Office regarding filing fees, audits, and reports. It likewise permitted carriage of low-power broadcast TV stations throughout local markets and modified cable statutory licenses to address carriage of multicast broadcast TV streams.

Congress shouldn't be rigidly wedded to any artificial principle in order to obstruct genuine regulatory reform. Rather, it's a sound principle that burdensome government regulations premised on market failure should be reduced or eliminated where competitive market conditions actually emerge. Whether necessary reforms are to take shape through legislation that is broad-based or narrowly targeted, immediate or incremental, typically involve context-specific judgments of expediency. Leaving expediency judgments aside, STELA reauthorization presents a fitting instrument for clearing away government restrictions on cable services that market changes have rendered unjustifiable.

For example, Congress could insert into STELA reauthorization legislation a provision to eliminate basic tier cable rate regulation. Under Section 623, the FCC is authorized to oversee local rate regulation for "basic tier" service on cable systems. And under Section 76.906 of the FCC's rules, "cable systems are presumed not to be subject to effective competition." Cable operators must overcome that pro-regulatory presumption by demonstrating the existence of effective competition. With two nationwide DBS providers, not to mention telco entrants into the video market that are rapidly gaining market share, cable operators have obtained relief from basic tier rate regulation in numerous local markets.

But the entire rate regulation system has outlived its reason for being. Rate regulations are an onerous form of government restrictions that can be justified only in instances of market failure. Much of existing law concerning cable video services was adopted back in the early 1990s. At that time, most people could obtain video subscriptions only through their local cable operators.

By contrast, today's video services market is marked by choice in video content and competition between different platforms. As indicated in the FCC’s 15th Video Competition Report, by mid-2012 there were approximately 101 million multichannel video programming distributors (MVPD) service subscriptions. Of those, 98.6% – that is, 130.7 million households – had access to at least three MVPDs, and 35.3% – 46.8 million households – had access to at least four MVPDs. As of mid-2012, DBS operators had a market share estimated at 33.6% and "telco" MVPD entrants had a market share of 8.4%.

Also, Congress could insert into STELA reauthorization legislation a provision to eliminate basic tier "must-buy" regulation. Under Section 623, cable operators are required to carry all local broadcast TV signals on their basic tier channel lineup. Must-buy is a central component of the government-prescribed basic tier that cable operators must make available to consumers as a pre-condition to offering additional tiers of cable channels.

But must-buy has likewise outlived its reason for being. Cable operators should be free to offer consumers video content according to their own editorial judgment, not government dictates. To the extent cable operators would rather carry broadcast TV content on a separate premium tier or not carry it at all, consumers could still seek such content from DBS providers, online video distributors such as Hulu or broadcast TV websites, or by using rabbit-ears that receive over-the-air high-definition TV signals.

Further, must-buy regulation poses serious First Amendment problems. Supreme Court case law clearly holds that MVPDs engage in and transmit speech, thereby receiving First Amendment protection from government restriction. The so-called cable bottlenecks that justified much of the cable regulation adopted in the early 1990s do not exist in today's video services market. This point was amply made in the context of the D.C. Circuit's decision in Comcast v. FCC (2013). The D.C. Circuit reversed the FCC's attempt to determine cable channel lineup placement by government decree. In his concurring opinion, Judge Kavanaugh explained that because "the video programming market has changed dramatically, especially with the rapid growth of satellite and Internet providers," MVPDs do not possess market power in the nationwide video services market. Concluded Judge Kavanaugh: "In restricting the editorial discretion of video programming distributors, the FCC cannot continue to implement a regulatory model premised on a 1990s snapshot of the cable market." (For more on this see  The Free State Foundation's "The Case for Program Carriage Reform.")

The must-buy requirement implements a regulatory model premised on a 1990s snapshot of the cable market. Congress should not wait for a new Supreme Court ruling to address must-buy’s misalignment with today's market conditions and First Amendment protections. By some legislative proposal or the other, Congress should eliminate must-buy regulation.

In fact, additional legislative proposals have been offered that would eliminate onerous and outdated regulations of video services. H.R. 3720, introduced by Rep. Steve Scalise, would eliminate both rate and must-buy basic tier cable regulation. Rep. Scalise's "Next Generation Television Marketplace Act" is much broader in scope than basic tier regulation, and its approach is something FSF scholars have previously expressed support for.

Likewise, H.R. 3196, introduced by Rep. Bob Latta, would eliminate the FCC's integration ban that prohibits MVPD-provided video devices from performing both navigation and security functions. The bill offers an approach that could be embodied in STELA reauthorization legislation. FSF scholars have previously commended the policy approach of Rep. Latta's "Consumer Choice in Video Devices Act."    

Congress should keep an open mind about using STELA reauthorization legislation as a route to regulatory reform for video services. Through STELA, Congress could tidy up its policy toward cable services by eliminating rate and must-buy basic tier regulations. Whether STELA is ultimately the right instrument for eliminating outdated cable regulations may be a question of expediency and tactics within the legislative domain. But there’s nothing unclean about the imperative to remove old regulations that are no longer justifiable in today’s competitive video services market.

FCC Report Reconfirms the Reality of the Video Market's Competitiveness

In the communications context, the word "disconnect" probably brings to mind what happens when a subscriber stops paying for their telephone or cable video service. Increasingly, however, the term has come to characterize the FCC's regulatory policy toward cable and video services.

On July 22, the FCC released its 15th Video Competition Report. Last year's Report confirmed what we already knew about the video market: namely, that it's innovative and competitive. The 15th Report reconfirms those conclusions. An updated swath of data compiled in the 15th Report points – yet again – to the proliferating video choices enjoyed by consumers.

But by bolstering the case for the video market's competitiveness, 15th Report data also magnifies the serious disconnect in the FCC's video policy. Much of the FCC's video regulations are based on 1990s analog-era monopolistic assumptions about cable "bottlenecks." Prior to the 15th Report it was already obvious that last-century rationales for extensive regulation had been rendered obsolete by innovation and competition in the video market. The latest data only restates the obvious: the disconnect – like a broken chain – between 1990s monopolistic assumptions and today's competitive video market conditions is growing.

 According to 2010 numbers contained in the 14th Report, 98.5% of all households – that is, 128.8 million households – had access to at least three multichannel video programming distributors (MVPDs). And 32.5% of households – 42.9 million – had access to at least four MVPDs. The 2011 numbers contained in the 15th Report show further improvements: 98.6% – 130.7 million households – had access to at least three MVPDs, and 35.3% – 46.8 million – had access to at least four.

Market share data can easily be overemphasized as an indicator of competitiveness, especially where markets are driven by rapid changes in technology, services, and consumer behavior. Yet, even in terms of market share, data cited in the 15th Report further further reinforces the video market's competitiveness. Between year-end 2010 and June 2012, "cable MVPDs lost market share, falling from 59.3 percent of all MVPD video subscribers at the end of 2010 to 57.4 percent at the end of 2011, and 55.7 percent at the end of June 2012." Meanwhile, direct broadcast satellite (DBS) market share increased from 33.1% in 2010, to an estimated 33.6% at the end of June 2012. And "telco" MVPD entrants served 6.9% of the market in 2010, increasing to 8.4% in 2011.

Also, the 14th Report called attention to the entry and growth of online video distributors (OVDs) as a potent source of value and competition. Data in the 15th Report further highlights the increasing popularity of OVD services with consumers:

SNL Kagan estimated that there were 26.6 million Internet-connected television households (i.e., accessed via an Internet-enabled game console, OVD set-top box, television set, or Blu-ray player), representing 22.8 percent of all television households, at the end of 2011, and estimated that by the end of 2012, the number would grow to 41.6 million, or 35.4 percent of television households.

Of course, traditional TV viewing far outweighs online video viewing. A cited study by Nielsen found that in the second quarter of 2012 Americans watched an average of nearly 32 hours per week of traditional TV and 2.5 hours of time-shifted TV, but watched approximately 4.5 hours per week of video using the Internet. Nonetheless, "SNL Kagan reports that the availability of large libraries of archival content and the availability of new content, coupled with the availability of broadband and an increasing number of Internet-connected devices, has enabled OVD substitution."

Further, the 14th Report acknowledged the ongoing replacement of analog systems with digital, rapid expansion of high-definition broadcasting and TV ownership, multi-casting, digital video recorder (DVR) options, video-on-demand functions, as well as TV-Everywhere and other mobility capabilities. The 15th Report reveals across-the-board increases in deployment, functionality, and adoption of such advanced video technologies. For instance, as of 2012, more than 74% of households have sets capable of receiving digital signals, including HD signals. Nearly 44% of households have DVRs. More than 5% of MVPD subscribers qualifying for TV-Everywhere access used it to view content in the month of September 2012. By year's end 2012, more than half the geographic footprints of the top eight cable operators had transitioned to all-digital video.

Of course, the 15th Report nowhere admits the effectively competitive state of the video market. While the statute doesn't expressly require any "effective competition" conclusion, such non-responsiveness to the evidence seems counterintuitive. Perhaps the FCC avoids any such conclusion out of fear it could be used in court to challenge any number of FCC legacy cable regulations.

Still, one can reach an "effective competition" conclusion through an admittedly abbreviated analysis supplied by the FCC itself. Consider today's nationwide market for video subscription services in light of the FCC's "competing provider test" for determining whether a local franchise area is effectively competitive. According to the test, effective competition exists if at least two unaffiliated MVPDs offer comparable video services to half of the area's households and the number of households subscribing to service other than the largest MVPD exceeds 15%.

Now recall that 98.6%, or 130.7 million households, had access to at least three MVPDs. Plus, 59.3% of households subscribe to cable, 33.6% subscribe to one of two DBS providers offering service nationwide, and 8.4% subscribe to a "telco" MVPD service. The nationwide MVPD market would pass the "competing provider test" for effective competition with flying colors. At the very least, it cuts cable bottleneck assumptions to pieces.

Ultimately, the underlying premises for video regulation need to be completely reexamined by Congress.  The legacy cable and satellite video regulatory apparatus needs to be dismantled. And First Amendment concerns with government regulation of video service providers' editorial and speech activities need to be respected. A market power framework that considers anticompetitive conduct and consumer harm could supply the analytical basis for a more targeted approach that reflects actual marketplace conditions.

A First Amendment-friendly, market-power approach to video regulation was recently sketched out by D.C. Circuit Judge Brett Kavanaugh in Comcast v. FCC (2013). At issue was an FCC order requiring Comcast to carry the Tennis Channel on a particular cable channel tier, pursuant to a statutory provision regarding program carriage agreements (Section 616). "In restricting the editorial discretion of video programming distributors," wrote Judge Kavanaugh in his concurring opinion, "the FCC cannot continue to implement a regulatory model premised on a 1990s snapshot of the cable market." Over the last sixteen years, Judge Kavanaugh explained, "the video programming market has changed dramatically, especially with the rapid growth of satellite and Internet providers," the result being that "neither Comcast nor any other video programming distributor possesses market power in the national video programming market." Judge Kavanaugh therefore concluded that "[u]nder the constitutional avoidance canon, those serious constitutional questions require we construe Section 616 to apply only when a video programming distributor possesses market power."

Until Congress replaces the legacy regulatory system, we face the unfortunate prospect of a still further disconnect between "a 1990s snapshot of the cable market" and actual competitive video market conditions. Expect future Video Competition Reports detailing innovative video services, competing business models, and changing consumer habits. And, absent a course change by the FCC, expect the agency, even in the face of abundant dynamic market indicators and pro-consumer data points, to continue avoiding the obvious about today's effectively competitive video market.

Video Report Promises End to FCC's Non-Compliance with Federal Law

Shortcomings to the FCC's new Video Competition Report are the subject of my Perspectives from FSF Scholars paper, "FCC's Video Report Reveals Disconnect Between Market's Effective Competition and Outdated Regulation." In that paper I briefly alluded to the fact that the new Video Report puts the FCC back into compliance with federal law – at least for now. Given the FCC's recent history in this area, it is a bigger deal than one might think.

Section 628(g) of the Communications Act states that "The Commission shall…annually report to Congress on the status of competition in the market for the delivery of video programming." But the FCC issued no Video Competition Report in the first three-and-a-half years of the current Administration.

Instead the FCC became sidetracked by its own agenda. It expended considerable energy and resources imposing controversial new mandates like network neutrality regulations and data roaming regulations. Those mandates have been vigorously criticized for being beyond the FCC's delegated statutory authority. During that time the FCC likewise devoted significant time and attention to imposing new procedural requirements regarding regulatory forbearance. Nowhere required by statute, those new forbearance rules and standards have had the practical effect of making it exceedingly difficult to make use of a key tool designed by Congress to grant relief from legacy-era telephone regulations. The FCC also expanded certain program access regulation involving terrestrially delivered video. And it issued a slate of proposed rulemakings to alter or, in some cases, expand existing video regulations.

While the FCC busied itself with its own pro-regulatory undertakings, its express statutory duty to annually release Video Competition Reports was ignored. The FCC claims to be data-driven in its policymaking. And FCC policy typically relies on the data it collects in its reports. But for more than three-and-a-half years, the FCC offered no report to Congress about the video market's current competitiveness upon which to base its video-related regulatory rulemakings, adjudications, and litigation.

Actually, the FCC's outdated Video Competition Report problem was worse still. FSF President Randolph May and I briefly noted this problem in our Perspectives paper "Accelerate New Video Breakthroughs by Rolling Back Old Regulations." The 13th Video Report, predecessor to the new Video Report, was itself inexcusably late. Released in 2009, the 13th Video Report came nearly three years after its respective predecessor. Even then the 13th Video Report provided little insight. Due to its being mysteriously withheld from the public after its internal approval by a vote of the FCC's Commissioners in 2007, the 13th Video Report contained data and information current as of 2006. And questions surrounding alleged manipulative use of data and strong agency bias in called the reliability of 13th Video Report into question.

Thankfully, with the new Video Report the FCC can now move beyond that debacle.

Most important of all, the data contained in this new Video Report presents a video market that is innovative and competitive. But as my Perspectives paper points out, the data makes all the more evident the disconnect between the video market's competitive conditions and the outdated regulations that restrict it.

FCC Should Limit Local Government Restrictions on Satellite Dishes

Direct Broadcast Satellite (DBS) service offers a competitive choice to consumers in today's video marketplace. But the competitiveness of DBS depends on consumers' ability to install dishes without undue burdens. Local government regulations that unreasonably impair dish installation in privately owned common areas undermine consumer choice and competition in the video market. The FCC should make clear that federal law prohibits those kinds of restrictions.

In passing the 1996 Act, Congress sought to ensure that DBS could effectively compete against incumbent cable operators, giving consumers more choices. To that end, Congress charged the FCC "to prohibit restrictions that impair a viewer's ability to receive video programming services through...direct broadcast satellite services." The FCC's over-the-air-reception-device (OTARD) rules preempt restrictions on the installation of satellite dishes that result in unreasonable delays or costs.

 

The FCC's OTARD rules clearly preempt unreasonable restrictions on dish installation and use in areas that are within the exclusive use or control of the consumer. In "FCC Should Act Against Unreasonable Satellite Dish Restrictions," I blogged about how the City of Philadelphia's ordinance restricting satellite dishes on the exterior walls of family dwellings appear to restrict installation on areas within consumers' exclusive control and appear to shift the burden of proving compliance with local registration requirements on the consumer. For those reasons, I suggested that Philadelphia's ordinance appears contrary to the OTARD rules.

But questions are now being raised about the scope of permissible local regulations regarding satellite dish installation on private property in common areasnot clearly subject to individual consumers' exclusive control. An ordinance recently passed by the City of Boston states that no antennas may be installed in common areas anywhere in the city without permission of its inspection department. And the FCC recently accepted public comments on a DBS industry petition asking the FCC to clarify that its OTARD rules preempt restrictions imposed by state or local governments in common areas where private property owners consent to dish installation.

The letter of the law passed by Congress contains no distinction between areas within a consumer's exclusive use and common areas. Nonetheless, the FCC previously declared that its OTARD rules apply to areas within a consumer's exclusive control but not to common areas. This decision was made with sensible deference to the rights of property owners and homeowner associations to make their own decisions about how common areas should be used. A building owner may choose to specially lease space in a common area for dish installation because its location offers better reception. Or a homeowner or condo association might adopt bylaws allowing dish installation in common areas under certain conditions.

Further, the FCC previously recognized that prohibiting all private restrictions on dish placement in common areas would amount to a regulation-imposed easement on private property. Also, prohibiting property owner restrictions regarding dish placement in common areas would likely have triggered constitutional questions involving takings of private property under the Fifth Amendment.

A dispute between DBS providers and local governments exists over whether state and local government police power concerns receive deference under current FCC policy when it comes to common areas. The FCC should now take the opportunity to resolve this dispute. It should spell out that its OTARD rules preempt state and local laws that unreasonably impair dish installation in common areas.

Promoting a competitive video marketplace to serve consumers is the overarching purpose of congressional policy. Congress expressly called on the FCC to preempt restrictions on dish installation as a means to furthering that policy. Local government restrictions that unreasonably impair dish installation in common areas run contrary to congressional intent. And those restrictions come within the terms of the FCC's mandate.

Of course, local governments and related associations have voiced opposition to OTARD preemption. They seek to defend state and local government police powers. And they claim that preempting only government restrictions on dish placement in common areas (and not private restrictions) results in unequal treatment.

State police power concerns, while deserving careful consideration, should not tip the scales against preemption. Even if OTARD rules were to apply to state and local government restrictions regarding dish installation in common areas, OTARD would not categorically ban all such restrictions. OTARD would, however, prohibit restrictions that unreasonably delay installation or use, unreasonably increase costs, preclude reception of a quality signal, or apply in a discriminatory manner. State and local governments would retain authority to pass restrictions on dish installation based on legitimate concerns such as health and safety. OTARD would not shield genuine public nuisances. But OTARD would require state and local governments to bear the burden of justifying their necessity and scope. Preemption would not impose any particular mandates on local government or commandeer their officers to implement federal policy.

The distinction between private property owners' restricting use of their own property and government restricting use of such property provides all the reason in the world to treat the two kinds of restrictions differently. This public/private distinction is directly traceable to the U.S. Constitution, which was established to limit government power and protect individual rights. Constitutional safeguards ensure that property rights do not exist at government's pleasure whenever it purports to act for the general welfare.

State and local regulations conflicting with federal laws are subject to the U.S. Supreme Court's preemption jurisprudence, but private property rights are not. Individual rights are subject to different jurisprudential standards reflecting different constitutional imperatives. So there is every reason for federal agencies, such as the FCC, to ensure that implementation of congressional policy provides special protections for individual rights, including property rights.

Prohibiting state and local government regulations that unreasonably impair satellite dish installation in common areas reconciles Congress's policy for furthering a competitive interstate video services market with private property rights. The FCC should make clear the preemptive operation of its OTARD rules when it comes to local government restrictions on dish installation in common areas.

Video Competition Renders Cable Rate Regulation Ridiculous

On April 9, the FCC's Media Bureau released an order granting the City of Boston's petition to re-regulate cable rates. The Media Bureau ruled that its 2001 order granting Comcast relief from cable rate regulation was premised on prospective build-out plans by RCN that a decade later have not come to pass. This despite the fact that RCN covers about one-third of the territory in question, and that the FCC has in prior orders found effective competition to exist when a competitor's overlap with an incumbent cable operator is as little as 18%. But the Media Bureau ruled that Comcast also has the ability to file a petition seeking relief from rate regulation on the grounds that it faces "effective competition" in the City of Boston from two direct broadcast satellite (DBS) providers as well as from RCN.

The FCC's cable rate regulation apparatus dates back to the 1992 Cable Act. Under Section 623, the FCC has the power to set standards for and oversee local regulation of rates for "basic tier" service on cable systems. And under Section 76.906 of the FCC's rules, "[i]n the absence of a demonstration to the contrary, cable systems are presumed not to be subject to effective competition."

But the FCC's rules for imposing cable rate regulations are premised on early 1990s ideas about cable operators' so-called "bottleneck." Those premises do not correspond to today's reality. As we've written about previously, consumers now enjoy vibrant video competition, with choices including two nationwide DBS providers, telco entrants in the video market, and myriad online video delivery options. DBS now has one-third of the video subscriber market. These rapid market changes have rendered Section 76.906's presumption against effective competition completely unjustifiable. And those same developments in the video market make cable rate regulation nothing short of ridiculous.

Presumably, it will take an act of Congress to eliminate local cable rate regulating authority and the FCC's corresponding regulatory obligations. But the FCC still has options to make its rules a better match with reality.

Section 623(b)(2) provides that the FCC shall periodically revise its cable rate regulations and in so doing "shall seek to reduce the administrative burdens on subscribers, cable operators, franchising authorities, and the Commission." The FCC could certainly consider rule-changes that would better streamline rate regulation and relief petitions so that cable operators like Comcast don't have to jump through so many hoops in order to receive proper treatment. More importantly, abundant nationwide competition should lead the FCC to reverse Section 76.906's presumption to recognize "effective competition" in the video market unless would-be rate regulating local franchising authorities can demonstrate that a lack of competition exists.

FCC Should Act Against Unreasonable Satellite Dish Restrictions

The FCC is now considering a petition asking it to declare that Philadelphia's city ordinances restricting satellite dishes on family dwellings are preempted by federal rules. Those ordinances may place unreasonable burdens on direct broadcast satellite (DBS) dish installation, both for DBS consumers and dish installers, and, if so, they should be preempted.

But the significance of the petition extends far beyond Philadelphia. If other cities were to follow with their own unreasonably cumbersome dish restrictions, this could undermine the attractiveness and competitiveness of DBS service and thereby harm all consumers of video services. Moreover, the FCC's authority under the Commerce Clause to prevent states and localities from adopting unreasonable restrictions that interfere with the siting and construction of cell towers, microwave facilities, and other radio frequency devices may be weakened if the agency fails to act when localities impose unreasonable restrictions.

In today's video marketplace, DBS provides a vital role as a competing provider of video services. But in order for satellite TV providers to compete with cable, telco video providers, and online-delivered video, consumers of DBS services need to be able to install dishes on their property without unreasonable restrictions. So in Section 207 of the Communications Act, Congress granted the FCC authority to preempt county, city, or even landlord restrictions, on video-receiving devices like TV antennas and satellite dishes.

The FCC's "over-the-air-reception-device" (OTARD) rule preempts restrictions on the installation of dishes that "impairs the installation, maintenance, or use" of antennas or dishes that are one meter in diameter or less and located in areas within the exclusive use or control of the consumer. OTARD defines an impairing restriction as one that: "(i) Unreasonably delays or prevents installation, maintenance, or use; (ii) Unreasonably increases the cost of installation, maintenance, or use; or (iii) Precludes reception or transmission of an acceptable quality signal." Non-impairing restrictions must be applied in a non-discriminatory manner. Also, FCC precedents put the burden of satisfying OTARD on the enforcing entity.

In November 2011, Philadelphia imposed a thicket of restrictions on dish installations that, in several respects, appear to conflict with OTARD and undermine federal policy. The ordinances, for instance, would restrict placement of dishes on certain balconies and patio areas – areas most certainly within home dwellers' exclusive control – where the city believes that better alternative locations are available.

Furthermore, ordinance restrictions on placement of dishes on exterior walls of buildings in effect treat exterior walls as categorically beyond the exclusive control of the consumer. But many landlords and condo associations consent to tenants' control over exterior walls for dish installation in lease agreements and condo bylaws. And in several aspects, Philadelphia's ordinances appear to shift the burden of proving that dish placement and registration requirements are satisfied to DBS consumers or dish installers to demonstrate the material delay, signal reduction, and significant additional cost considerations. But OTARD puts the burden on the restricting entity, not the consumer.

Federal preemption of state and local police power regulations always involves delicacies and should be handled with care so as to respect legitimate state and local authority, especially with respect to public safety concerns. Yet, in important respects, Congress has authorized the FCC to preempt local restrictions that have the effect of impairing interstate commerce in competitive technology markets. In November 2009, for instance, the FCC exercised its authority under Section 332(c) to preempt local restrictions responsible for blocking or unreasonably delaying cell tower permit approvals to the detriment of the interstate commercial market in wireless services.

Congress also recognized the interstate commercial nature of nationwide DBS services. Congress sought to protect the rights of consumers to engage in interstate transactions with DBS providers, entrusting the FCC with exclusive regulatory authority over DBS. And Congress expressly empowered the FCC to prohibit local restrictions on dish installation that could otherwise pose barriers to DBS offering consumers an attractive competing video service. So it is incumbent on the FCC to take decisive measures to carry out Congress's objectives.

Onerous and intrusive local restrictions on satellite dish installation and their use interfere with the federal scheme for regulating DBS service. Restrictions that unreasonably burden dish installers and DBS consumers make DBS service a less attractive video service option. In order to protect the existing competitive market for the provision of video services, the FCC should act to ensure dish installation – and therefore DBS services – remains free from excessive and unwarranted restrictions imposed by localities. In particular, the FCC should address the kinds of problems exemplified by Philadelphia’s ordinances, lest it permit unreasonably burdensome restrictions in one major city to be replicated in cities across the nation.

A declaratory ruling by the FCC will clarify what kinds of local restrictions on dish installation are prohibited and what kinds of protections property owners and DBS consumers enjoy. In so doing, the agency will help protect consumer choice and a competitive video market. And, more broadly, the FCC will show its willingness to exercise agency authority under the Communications Act and the Commerce Clause to ensure that the channels of interstate commerce remain open to competitive technologies.