August 6, 1998
| In re: | Petition for Rulemaking of Ameritech New Media, Inc., Regarding Development of Competition and Diversity in Video Programming Distribution and Carriage |
Although I support the bulk of this Report & Order and commend the Cable Services Bureau for its fine work, I disagree with the Commission's decision in Part III.A to impose damages for violations of the program access rules. I also write to express my view that we possess no clear statutory authority to extend these rules to govern terrestrially-delivered programming.
In my opinion, damages are neither necessary nor advisable. Moreover, they may undermine the Communication Act's statutory caps on forfeiture limits. For these reasons, I would not create such a remedy.
As an initial matter, I note that a simple finding of liability carries with it a great deal of costs for the program access violator. The "black mark" on the company's regulatory record affects its dealings here at the Commission and may also make it a riskier candidate, from the point of view of the capital markets, for investments and loans. Such a finding also encourages other would-be complainants to come forward and initiate program access proceedings against the company, in itself another substantial effect on the company.
There is no real evidence that the current penalty scheme for program access lacks a sufficient deterrent effect. Since the passage of the program access statute, the Commission has hardly been overrun with complaints pursuant to that provision. In fact, over the last 5 years, only 34 program access complaints have been filed at the Commission, and of that number, in only 3 cases has the Commission ruled in favor of the complainant. Accordingly, the Commission has on several occasions declined to expand the program access rules on the ground that they seemed to be achieving their intended purpose. See Program Access First Reconsideration, 10 FCC Rcd at 1911; 1996 Video Competition Report, Annual Assessment of the Status of Competition in Markets for the Delivery of Video Programming, Third Annual Report, 12 FCC Rcd. 4358 (1997) at paras. 149-64. Subsequent to those decisions, there has been no discernible upward trend in program access violations that would indicate inadequate deterrents, so today's movement towards strengthened regulations seems hard to explain on the basis of need. And from a general perspective, there is no shortage of "leverage," for better or worse, that this Commission can exercise over regulated entities for violation of our rules and regulations; in the end, we have power over their licenses and thus their livelihoods.
Why damages would as a general matter pose any greater deterrent effect than forfeitures, which we are clearly authorized by statute to impose, is also unanswered by the record before us. As a matter of fact, the Commission has never exercised its forfeiture power; it is thus hard to see how we could know such a penalty to be ineffective. I do not think it makes for good public policy for the Commission to go out of its way to create an entirely new set of regulations on industry without a showing that existing rules are not working. Taxpayers should not fund, and private companies should not expend resources commenting on, rulemakings that produce regulations that are not clearly necessary. Unfortunately, this item increases the layers of regulation to which certain multichannel video programming providers are subject without the antecedent conclusion that the underlying rules are inadequate to the task at hand.
The creation of a damages remedy is also inadvisable as a practical matter. Much of the point of this item is to expedite the adjudication of program access complaints. But a bifurcated proceeding in which we must determine damages will only prolong and complicate these adjudications. I fear that the Cable Services Bureau will expend as much, if not more time, assessing damages in these cases as on the basic question of liability. How does one determine what position a programmer would have occupied if they had had access to certain programming? How many more subscribers would they have gained, how much more could they have earned in advertising revenue? The difficulty that we will have in defining these essentially speculative issues (not to mention the production and review of the mountain of documents theoretically relevant documents) is almost certain to bog down the process. In this regard, it is telling that even in this item the Commission is unable to define with any precision the outlines for calculating damages for program access violations. And to the extent the Commission sidesteps this problem by moving toward "standardized" damages, as some have suggested, then we would simply be replicating forfeitures under another name.
Finally, I find it relevant that the imposition of unlimited damages may be an end-run around the statutory caps on forfeitures contained in sections 503(b)(2)(A) and (C) of the Communications Act. Those sections provide that forfeitures against cable television operators "shall not exceed $25,000 for each violation or each day of a continuing violation, except that the amount assessed for any continuing violation shall not exceed a total of $250,000 for any single act" and that in any other case, such as one involving a vertically integrated programmer, "the amount of any forfeiture penalty . . . shall not exceed $10,000 for each violation or each day of a continuing violation, except that the amount assessed for any continuing violation shall not exceed a total of $75,000 for any single act." These sections thus express a clear Congressional intent to limit the monetary liability of regulated entities.
If the Commission is creating a damages remedy merely to avoid these limits on liability, I am unsure about the legal propriety of such an approach. The real problem here seems not that forfeitures per se are ineffective but that the limits on forfeiture amounts are, in the eyes of those who advocate damages, too low. See Reply Comments of Ameritech at 16 ("The incentive for violating the rules is even greater in light of the woefully inadequate statutory caps on forfeitures for cable operators and affiliated programmers. Ameritech . . . [believes] that the statutory maximum for violations of the Commission's rules by cable companies -- $250,000 -- is far too low to deter anticompetitive behavior by incumbent cable operators. Moreover, the statutory cap on forfeitures for vertically integrated programmers is only $75,000. These amounts are incredibly low when compared to the sizable economic benefits realized by incumbents when they violate the rules."). But if that is the case, the answer lies with Congress, which has the power to revise these limits. In fact, that is precisely what Congress has done in the common carrier context, raising the forfeiture limit for those entities to an aggregate of $100,000,000. If Congress wanted to raise the limits for cable operators and vertically integrated programmers too, they surely could do so. They have not amended those limits, however, and we should not take backdoor measures to undermine them.
In closing, I would observe that the most important thing in program access proceedings -- as in all other Commission proceedings -- is a timely resolution of complaints. For that reason, I am pleased that we have established clear time limits for program access proceedings. If we do not make accurate but prompt findings in these reviews, regulated industries will simply find private mechanisms for resolving compensation questions and bypass the administrative process altogether.
As I noted in the Notice of Proposed Rulemaking in this proceeding, section 628 of the Communications Act, the statutory basis for our existing program-access scheme, by its terms governs the provision of "satellite cable programming" and "satellite broadcast programming." I have not been persuaded by those who urge us to extend our regulations to cover terrestrially-delivered programming that the import of this plain language can be overcome.
Accordingly, while I agree entirely with the rationale given in the item for declining to extend program access rules to terrestrially-delivered programming, i.e., that the issue appears to be a nonproblem at this point in time, I also believe that we lack statutory authority to make such rules in any event. Congress, rather than this Commission, is the appropriate governmental entity to redress any competitive issues that may exist with respect to programming that is not transmitted (or retransmitted) by satellite. In fact, legislation was recently introduced by Congressmen Tauzin and Markey that would extend the program access rules to govern terrestrially-delivered programming. To my mind, the introduction of this legislation is a further indication that current statute does not cover such programming. We should, at the very least, stay our hand while Congress debates the matter.