Congress asks FCC for records on 'a la carte' debate

It was an ambitious idea: the possible invocation of a clause in the law that might have given the FCC the authority to make cable TV providers offer individual channels to their customers. Now, the US House is wondering whether it was too ambitious.

Last November, US Federal Communications Commission Chairman Kevin Martin surprised most everyone by making preparations to invoke a legal clause that would give the Commission authority it hadn't exercised before. Under a clause of telecom law, the FCC could direct cable TV operators to carry certain classes of programming, ostensibly as a way of ensuring diversity.

But it could only do so, the law said, if it could prove that cable systems with 36 channels or more were available to at least 70% of US households, and that at least 70% of those households were subscribers. Chairman Martin claimed he had obtained that data, which flew in the fact of existing data that said CATV penetration was, at best, 60% and probably much lower. The FCC's annual report to Congress had actually cited the 60% figure.

Martin's reference to the so-called "70/70" report triggered skepticism about how he obtained that data, ironically from Martin's two fellow Republicans on the Commission, Deborah Taylor Tate and Robert McDowell. The report's own publishers, Warren Communications News, had actually openly questioned, in a trade publication article, whether its own report was conclusive enough for Martin to have relied upon it as a trigger for seeking special CATV authority. On November 14, Comms. Tate and McDowell wrote Warren seeking clarification.

That letter was the first sign of smoke, which is typically an indicator of something else. What did the Chairman have in mind when he sought to invoke FCC authority over CATV programming? Yesterday, a letter from the House Energy and Commerce Committee, co-signed by the leaders of the Subcommittee on Oversight and Investigations, sent to Chairman Martin, indicated that Congress may have evidence from unnamed FCC officials, literally of a conspiracy to commit fraud.

"The Committee...and its Subcommittee on Oversight and Investigations are investigating allegations from current and former FCC employees and other sources, which we have reason to believe are credible," reads yesterday's letter to the FCC chairman. "These allegations relate to management practices that may adversely affect the Commission's ability both to discharge effectively its statutory duties and to guard against waste, fraud, and abuse. While the sources are believed to be credible, the Committee will require additional information and records to determine whether these allegations can be substantiated."

To that end, the Committee is seeking copies of all FCC communications on a variety of important topics, including all discussions about whether the Commission should audit telecom carriers, discussions about the hiring and firing of staff members, and last and certainly not least, this little item:

"The FCC's analysis of the so-called 70/70 test, as set forth in the November 2007 Report...including all communications related to the 70/70 test, the decision not to include or rely upon data used in previous reports other than the Warren Communications data, including some of the FCC's own data...comments provided by Warren on use of the Warren data and the way it was compiled, and any directive or instructions given to FCC employees concerning staff's ability to discuss with any of the four Commissioners or their staffs the existence or substance of other data sources upon which analysis of the 70/70 test might have been made."

So not only is the House Committee investigating Chairman Martin's motives and communications, but whether he actively sought to prevent all four of his fellow commissioners from knowing what he may have been up to.

In a statement to the Associated Press this morning, an FCC spokesperson said it will cooperate with the Committee's request.

Last January, the National Cable and Telecommunications Association came out in strong opposition to an "a la carte" system, saying, "Without government regulation, an impressive and vibrant cable programming industry has developed over the past 25 years. Today, cable offers consumers a tremendous entertainment value. We don't need a US Department of Television."

The NCTA statement called into question the FCC's revised data, saying it relied on "alternative hypothetical assumptions" in its argument that "a la carte" could conceivably be in the consumer's best interests. "But the FCC study itself undermines the conclusion," it continued. "Assuming that the FCC's new methodology is correct, 40% of consumers who subscribe to a digital cable service could receive 20 channels for about the same amount as they pay today for up to 150 channels. Of course that assumes that the 20 channels to which they want to subscribe could survive in an a la carte world."

If the NCTA's interpretation of the FCC study is correct, certain channels that might be made available in an "a la carte" environment might receive higher returns than the average basic cable channel reaps from its share of carriage fees. So indeed somebody might have unusually benefitted from Chairman Martin's plan...had he been able to pull it off. The FCC has two weeks to comply with the House Committee's request.