In a major move, the US telecom regulator Federal Communications Commission (“FCC”) recently voted for the elimination of the so-called “Terrestrial Loophole” regulation that so far allowed cable operators to block competitors’ access to some popular video programming. The FCC voted 4-to-1 for abolishing the rule under the regulator’s Cable Act of 1992. The opposing vote came from a Republican member of the FCC.
The laissez-faire Terrestrial Loophole regulation enabled cable companies to deny competitors (such as telecom and satellite TV operators) access to specific must-see entertainment programs which they own. Until now, FCC’s Cable Act prevented cable operators from blocking competitor access to video programming that are aired over satellite networks. However, the law allowed them to block video content being delivered over a terrestrial (land-based) fiber connection.
FCC’s new rule provides for a formal review process that enables telecom and satellite TV operators to file petition with the regulator for accessing blocked cable-owned terrestrial-delivered programming. The order also prevents cable operators from blocking their programming during contract renewal negotiations.
The latest amendment to the Cable Act of 1992 to abolish the loophole rule has provided a sigh of relief to the incumbent telecom carriers and satellite TV companies that offer subscription-based video services to their customers who were so far prevented from offering popular programs such as regional sports networks. Moreover, besides promoting fair competition in the market, FCC’s latest enactment has expanded the periphery of subscriber preference as they can now have more video service providers.
Cable companies such as Cox Communications and Cablevision Systems (CVC) have denied access to popular sports programming (such as San Diego Padres games and Madison Square Garden network) to U.S. telecom behemoths such as AT&T (T) and Verizon (VZ) that offer video services under the U-verse TV and FiOS TV monikers, respectively. Moreover, satellite TV giants, DirecTV (DTV) and Echostar Corp’s (SATS) Dish Network also do not have access to these must-have video contents.
On the other hand, cable giant Comcast (CMCSA) has prevented its satellite counterparts (such as Dish Network) from accessing its proprietary regional sports channels, in an effort to differentiate its offerings. FCC’s decision to abolish the loophole rule just came ahead of the regulator’s review (expected in early February 2010) of the proposed merger between Comcast and NBC Universal. The agency’s new rule has effectively addressed a critical competitive issue related to the merger.
Inaccessibility to critical cable-owned sports channels has barred satellite and telecom companies from penetrating deeper into the video market, especially in the metropolitan markets. FCC’s initiative to close the loophole provision has now leveled the playing field for these operators.
Read the full analyst report on “T”
Read the full analyst report on “VZ”
Read the full analyst report on “CMCSA”
Read the full analyst report on “DTV”
Read the full analyst report on “SATS”
Read the full analyst report on “CVC”
Zacks Investment Research
