FCC Deems AT&T’s OTT Service Effective Cable Competitor

Will allow for deregulation of cable rates in parts of Hawaii and Massachusetts.
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WASHINGTON—AT&T TV Now and Charter Communications are officially competitors in the FCC’s eye, and as a result is prompting the deregulation of cable rates for Charter Communications in certain areas of Hawaii and Massachusetts and setting a precedence for deregulation of cable rates as a whole.

ATT-TV-Now

This stance comes as the commission sided with Charter’s petition that the OTT streaming service AT&T TV Now qualifies as a local exchange carrier, a key benchmark in determining that a cable entity has sufficient competition to allow for deregulation of cable rates. With the prevalence of services like Netflix, Hulu and Amazon Prime, as well as soon to be launched streaming services from Disney, Apple and more, FCC Chairman Ajit Pai said it couldn’t be argued that cable wasn’t subject to effective competition “across the nation.”

“In granting this petition,” wrote John Eggerton for TVT’s sister publication Multichannel News, “the FCC is effectively ending basic rate deregulation of cable as well as signaling that if traditional satellite delivering sunsets in favor of streaming, cable rates won’t be returning.”

The regulation of cable rates was set up as part of the Communications Act for basic cable service tier and equipment if cable systems were not subject to effective competition. However, four benchmarks were put in place to determine if new competition was added in the case of innovative video programming. Satellite services, like DirecTV, which is owned by AT&T, were already deemed effective competition. This determination for AT&T TV Now marks the first time an OTT service has been deemed as such.

Some of the key criteria in determining AT&T TV Now as effective competition included comparable services, being offered direct to home and is marketed by AT&T.

As a result, local franchise authorities in Kauai, Hawaii, and 32 communities in Massachusetts may no longer regulation basic-tier cable rates.

Along with Pai, fellow Republican commissioners Michael O’Rielly and Brendan Carr approved of the decision, while Democratic commissioners Jessica Rosenworcel and Geoffrey Starks concurred, which falls short of giving their full support as some reservations remain.

Sen. Ed Markey (D-Mass.) expressed such misgivings about the FCC’s decision in a letter he sent to Pai on Thursday, Oct. 24. His letter asked the FCC to deny the petition, worrying that such a decision could lead to increased prices, noting that rates are higher in unregulated markets compared to regulated ones.

NCTA—The Internet & Television Association released a statement supporting the decision: “We commend the commission’s effective competition ruling, which recognizes that today’s video marketplace is vibrant and competitive with a multitude of choices and services for consumers to enjoy.”