The FCC may be about to engage in a pitched battle with the cable industry according to a recent New York Times article. The FCC may cite the “70/70 rule,” which stipulates that their regulatory oversight increases when cable is available to at least 70% of U.S. households and at least 70% of U.S. households subscribe to cable. If enacted, the FCC could take on very controversial issues including, limiting large MSOs from growing any bigger and addressing programming availability, even taking on the “third rail” issue of a la carte programming. The FCC cites cable’s infamous reputation for rising subscription rates, which far exceed the rate of inflation, as evidence of their growing market dominance.
This development could have profound impact on the competitive environment for video and triple play services. By limiting cable MSO growth, cable’s competitors may be in a better position to gain market share. Large telcoTV providers like Verizon and AT&T may benefit from limiting the growth of Comcast and Time Warner Cable. Perhaps the most implicative issue that may arise as a result of this FCC initiative is programming availability. Gene Kimmelman, vice president for federal affairs at Consumers Union tells the New York Times, this “… will give the commission an arsenal of tools to limit discriminatory practices — notably exclusive dealing, tying arrangements and other relationships — if they harm the diversity of programming.” If the FCC forces the cable industry’s hand on issues like a la carte programming, allowing cable competitors to efficiently pick and choose programming according to consumer preference, we could see dramatic changes in the way channel line ups are presented. Such a move could provide IPTV operators an opportunity to differentiate themselves by offering a much more diverse channel line up, not just a “me too” channel line up as they do now. By diverse, I don’t mean 300+ channels. I mean allowing subscribers to choose which channels they would like to receive. IPTV operators stand to benefit the most, initially at least, because their switched digital video architecture gives them more options for diverse channel line ups. In concept, IPTV operators could deliver “personalized” channel line ups to each subscriber, giving individual subscribers the opportunity to select which channels they want. We are certainly far off from such a scenario and many stars would have to align before it is reality. But if the FCC gets aggressive with this 70/70 rule initiative, it certainly will impact the competitive environment in probably very meaningful ways.