47 Federal Communications Law Journal 511 (1995)
As a result of the 1992 Cable Television Act, the FCC set out regulations intended to encourage competition to established cable operators by insuring that alternative multichannel video programming distributors (MVPDs), such as MMDS, SMATV, DBS, and "overbuilt" cable systems have access to programming on the same terms and conditions as established cable operators. The FCC's specific regulations, however, apply only to program suppliers in which any cable operator has a 5 percent or greater equity interest. These vertically integrated programmers are prohibited from any price discrimination in any market (except for differences the programmer can justify on the basis of costs), or from exclusive contracting with any cable operator unless the program supplier can demonstrate to the FCC that such contracts are in the public interest.
The Author argues that whatever the net benefit of program access regulations may be in general, separate treatment of integrated and nonintegrated program suppliers is not justified. The empirical record makes clear that both integrated and nonintegrated suppliers engage in the same potentially anticompetitive foreclosure behavior involving exclusive dealing. Empirical evidence that program suppliers charge consistently higher input prices to alternative MVPDs appears to be unrelated to vertical integration. To the extent that cost factors are not responsible, these differences can be explained, not by vertical foreclosure, but by variation in outcomes of the bilateral input price-setting process between program suppliers and MVPDs having varying degrees of bargaining power in the programming market.
The Author concludes that any program access regulations should apply equally to integrated and nonintegrated program suppliers. One result of unequal treatment is likely to be evasion of the regulations by means of vertical divestiture, further undermining the intent of the regulations and sacrificing the benefits of vertical ownership to programming innovation and financial support. Finally, the Author comments briefly on recent FCC program access decisions.
"Vertical Integration and Program Access in the Cable Television Industry,"
Federal Communications Law Journal:
3, Article 2.
Available at: http://www.repository.law.indiana.edu/fclj/vol47/iss3/2