Court Upholds FCC Rule on Video Service

Agency Made It Easier for Phone Firms to Compete With Cable Operators

An appeals court yesterday rebuffed an attempt by cable providers to challenge a rule that makes it easier for phone companies and other potential competitors to move in on their turf.

In the decision, the U.S. Court of Appeals for the 6th Circuit upheld a rule made last year by the Federal Communications Commission that imposes stricter guidelines on how municipal and state governments may evaluate new video service providers.

The court dismissed a petition by cable operators and local governments to overturn the FCC's 90-day time limit on local regulators to approve applications by new entrants in cable and other pay television services. The decision also backs the FCC's rule that city and state regulators can't demand favors in exchange for their approval.

The National Cable & Telecommunications Association and local governments, including New York City officials, challenged the FCC's 2007 rules with their petition to the appeals court. The organizations argued that the commission doesn't have authority over local regulators, called video-franchising authorities, and that such rules were unnecessary.

Reviewing the history of cable regulation and the FCC's jurisdiction, the judges said the FCC has authority over the municipal and state regulators that authorize new video franchises in their markets. Also, the FCC "did not engage in arbitrary and capricious rulemaking," the judges wrote in their opinion.

The dispute underscores the fierce competition between phone companies and cable operators to gain customers for bundled packages of video, voice and Internet services. The phone companies AT&T and Verizon Communications and cable operators Comcast and Time Warner are trying to get customers to subscribe to packages that combine all three services, which generally keep customers longer and generate more revenue. Cable companies also have pushed into telecommunications services with traditional phone lines and investments in WiMax, a wireless broadband technology.

"The FCC's decision was pro-consumer and designed to open up markets controlled by incumbent cable carriers," said Michael E. Glover, deputy general counsel for Verizon.

Verizon and AT&T had complained after franchise video authorities forced service providers to provide a new fire station and videocameras for an event in Lynbrook, N.Y., in exchange for licenses to enter their markets.

Verizon said in a document filed with the FCC in March 2006 that the local governments stalled on their approval of applications. The company said 90 percent of its applications took at least 15 months to be reviewed.

FCC Chairman Kevin J. Martin lauded the court's decision, saying it will create more competition in the market for paid video services, which have traditionally been dominated by cable operators.

"This means consumers will not only get more choices among providers and additional competition, but also lower bills," Martin said in an interview.

Cable trade group NCTA downplayed the significance of the ruling. It said the court's order will have little impact because AT&T's U-Verse and Verizon's FiOS video services have broken into many new markets.

"Today's video marketplace is intensely competitive, and consumers are enjoying more choice, more services and better value than ever before," said Brian Dietz, spokesman for the NCTA.