Cable Lobby Girds for Regulatory Rhubarbs

On Wednesday, cable lobby chief Kyle McSlarrow delivered a homily on the sanctity of private property. On Thursday, the U.S. Supreme Court delivered a decision on the sanctity of private property, so long as the government doesn't want to build a mall on it. The sanctity of private property is the linchpin of the cabl
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On Wednesday, cable lobby chief Kyle McSlarrow delivered a homily on the sanctity of private property. On Thursday, the U.S. Supreme Court delivered a decision on the sanctity of private property, so long as the government doesn't want to build a mall on it.

The sanctity of private property is the linchpin of the cable industry argument against being forced to open the coax to third-party Internet Service Providers at discounted rates--the crux of the Brand X case now before the high court (a decision on Brand X is expected Monday). At issue is whether cable modem service should be classified as an "information" or "telecom" service, the latter being more akin to phone service and thus subject to regulatory monkeying.

The FCC deemed cable modems an information service. Brand X Services, an indie ISP, said no way and the Ninth Circuit Court of Appeals in San Francisco agreed. The rest is up to the justices, who just ruled in Kelo v. City of New London that municipalities can bulldoze peoples' houses if they so choose.

Whether or not the 5-4 Kelo decision has any bearing on Brand X remains to be seen, but both cases involve private property rights. McSlarrow, in a God-and-country kind of speech at a Media Institute gathering in Washington, D.C., said, "it cannot be said too often--cable operators created a private network. No one gave us a government granted-monopoly with guaranteed rates of return, and no one gave us bandwidth in our cable plant for free. We created it."

McSlarrow also carried on about the venerable tradition of all cable lobby chiefs by invoking the ever-increasing capitol investment figure. After briefly describing the wonders of cable, he said, "This isn't an accident. It is the result of risk-taking over several decades, and most recently, a decision by the cable industry to spend nearly $100 billion of private capital building a hybrid-fiber network."

When asked precisely what cable operators bought for $100 billion, McSlarrow said he wasn't sure, but that "no one has ever questioned the investment," which is not exactly true. In 2003, when the touted figure was a mere $75 billion, analysts wrote that it accounted for all capital investment in cable. Since then, cable operators have privately confirmed that the capex number includes everything, but that it all supports advanced services in some way.

While third-party ISP access plays out in the Supreme Court, telcos are nipping at cable's other flank in an incessant drive for a really good video franchise structure. Telcos want to bypass municipalities and cut deals on the state, or even national level. Cable is bound by the 1996 Telecom Act to deal with local franchising authorities, which have the right to regulate basic service rates. Cable pays in the neighborhood of $2.4 billion in franchise fees, in addition to whatever other hoops local franchise authorities cook up for MSOs to jump through. McSlarrow said that similar services ought to be franchised alike.

"Last year," he said, "the cable industry applied those principles when we put forward a proposed framework of rights and responsibilities for IP voice providers," like E-911 service and provisions as prescribed in the Communications Assistance in Law Enforcement Act, or CALEA. "We believe a similar doctrine should govern the regulation of IP video services," he said.

McSlarrow said the NCTA was not pushing any "specific revision of franchising," but that all parties involved should be at the table, "including municipalities."