The exclusion of terrestrial program services from the program access provision of the 1992 Cable Act is not a “loophole” in need of closing.  Rather, it is a well-considered expression of Congress’s desire to limit the extent to which program access regulation interferes with the pro-competitive exercise of contractual rights. 

Exclusivity is a cornerstone of contract law . 

The government of the United States ordinarily does not tell those who create and distribute products with whom they should enter contracts or what the terms and conditions of those contracts should be – including exclusivity.  This general policy holds true for television programming as well.  Indeed, most television programs – and, in particular, most sports programs – are licensed to broadcasters and cable networks on an exclusive basis.

Temporary program access requirements. 

As part of the Cable Act of 1992 – which was intended to spur competition in the multichannel video marketplace – Congress enacted temporary program access requirements that represented a limited departure from this general policy of favoring the pro-competitive exercise of contractual rights.  These program access rules were designed to ensure that cable could not hamper the growth of its competitors by denying them satellite-delivered program networks in which cable companies had an ownership interest (“vertically integrated” program services).  The exclusivity rules were never intended to be permanent and are currently scheduled to sunset in 2012.


The terrestrial exemption. 

In passing program access laws, Congress carved out a narrow and temporary exception to the normal workings of the marketplace in which programmers and distributors determine how content will be distributed.  Congress struck a deliberate balance: it sought to ensure that cable’s then-fledgling competitors could not be denied sufficient access to popular satellite-delivered programming in which cable companies had an ownership interest while preserving the pro-competitive benefits of exclusivity in order to foster new program networks – especially local and regional program networks which are often delivered most economically by terrestrial means.  Congress consciously and correctly exempted terrestrially-delivered cable program networks from the 1992 program access laws.

Competition is thriving . 

Today, it is clear that Congress’s decision to exempt terrestrially-delivered networks has not impeded competition, and indeed competition in the multichannel video marketplace is thriving.  Over the past 12 years, cable’s share of multichannel video subscriptions has dropped from 90 percent to 65 percent, and 35.7 million subscribers (more than one in three) receive their multichannel video programming from non-cable providers.  The cable industry’s two largest competitors – DIRECTV and EchoStar – are the second and third largest multichannel video providers in the United States, and the nation’s largest telephone companies are deploying video services (Verizon’s FiOS TV service is now the nation’s 9^th largest multichannel video service provider).  In addition, the percentage of program services in which cable companies have a financial interest has declined sharply, from 44 percent in 1996 to 15 percent in 2006.

There is no evidence of any problems with the current program access rules or with the multichannel video marketplace.  The goal that Congress envisioned in 1992 – a highly competitive multichannel video marketplace – has been reached.

A decision to distribute a program network by satellite or by terrestrial means is based on efficiencies, not on the program access rules.  Satellite distribution is, because of its national footprint, the more economical means of distributing national program networks.  Terrestrial distribution may be more efficient for local and regional services, for which the nationwide “footprint” offered by satellite is unnecessary.

Since 1992, the FCC has received only a handful of complaints alleging that cable networks are using terrestrial delivery to “evade” the program access rules.  In every instance, including Comcast’s SportsNet in Philadelphia and Cablevision’s MetroChannels in New York City, the FCC found that the use of terrestrial delivery was justified by legitimate business rationales and by the circumstances of local markets, and was not related to “evading” the program access rules.

Exclusivity as a general rule is a pro-competitive tool that benefits consumers.    It provides incentives for competing multichannel providers to develop unique video services that let them distinguish themselves from one another in the marketplace.  Indeed, cable’s competitors have themselves used exclusivity to differentiate their service offerings from those available from cable.  For example, DIRECTV has exclusive distribution rights to the NFL “Sunday Ticket” package – it is not available to cable, Dish Network, Verizon, or AT&T customers.  Similarly, broadcasters are permitted to force cable operators to black out network and syndicated programming in order to protect the broadcasters’ exclusive territorial rights.

Program networks, including local and regional services, are high-risk ventures – some of which have failed in recent years.  Offering distributors the opportunity to be the exclusive source of such programming can be essential to attracting investment, promotion, and carriage.

Congress deliberately and appropriately kept terrestrially-delivered programming free from any program access requirements .  The legislative history of the 1992 Cable Act provides clear evidence that Congress intentionally sought to limit the program access rules to vertically-integrated, satellite-delivered services in order to avoid limiting investment in local and regional programming.

At the time of the 1992 Act, over a dozen local and regional program services were delivered by terrestrial means, including system-specific local origination channels and regional networks, such as Time Warner’s NY1 News, which launched in September 1992, just prior to the passage of the 1992 Act.

The Senate version of program access legislation referred to national and regional programming without any mention of the means of delivery.  By contrast, the final bill adopted the House-passed program access language, which was limited to "satellite cable programming.”

Less than two years after the 1992 Cable Act became law, an amendment that would have imposed program access obligations on "video programming delivered by any means" was floated and then withdrawn.  Rep. Tauzin (R-LA), the principal author of the 1992 Act’s program access provisions, commented at the time that the proposed amendment raised issues that needed additional scrutiny, particularly the issue of whether applying program access rules to terrestrially-distributed cable programming would discourage the production of local and regional programming.