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ACA Urges FCC To Provide Congress With Granular Analysis Of Rise In Small Cable System Closings

Trade Group Suggests Closings Largely Due To Rising Costs, Including Higher Programming And Infrastructure Fees

PITTSBURGH, September 12, 2012 - The American Cable Association called on the Federal Communications Commission to identify in its next video competition report to Congress the number of small cable systems that have shut down operations in the past year and investigate the cause and context, including to what extent higher programming and infrastructure fees drove the decision to terminate multichannel video programming service in a particular community.

"The FCC has data showing that the number of cable systems has significantly decreased over the past five years. ACA believes that this trend reveals significant problems in the market for the delivery of video programming, particularly for smaller multichannel video programming distributors (MVPDs) serving smaller markets and rural areas. The FCC should be reporting data indicating that the number of cable systems nationwide are decreasing, and small cable systems are disappearing from communities at a steady if not increasing rate and assessing the likely harm to consumers and possible causes, both regulatory and non-regulatory," ACA President and CEO Matthew M. Polka said.

ACA set forth its views in a Sept. 10 filing with the FCC in connection with the preparation of the agency's 15th annual video competition report to Congress, which is a snapshot look at the factors affecting competition for the distribution of video programming by broadcasters, cable and satellite TV operators, as well as options offered by the newly-recognized class of online video distributors (OVDs), including names like YouTube, Hulu, Netflix and Aereo.

ACA's comments also urged the FCC to continue to highlight the growing importance of retransmission consent fees as a revenue category for broadcasters and to recognize explicitly that competition among local broadcast stations includes not only competition for advertising dollars but also competition for retransmission consent.  Relatedly, ACA asked the FCC to quantify the extent to which non-commonly owned TV stations in a single Designated Market Area (DMA) are coordinating their negotiations with pay-TV providers for retransmission consent instead of vigorously competing with one another, and to discuss the potential implications of this practice on competition.

"The FCC's next video competition report will not accurately depict broadcast television structure, performance, and competition unless it provides all available data and information pertaining to the practice of coordinated retransmission consent negotiations by non-commonly owned TV stations operating in the same market," Polka said.

ACA said it was also concerned that the demise of small cable systems has been accelerated by rising pole attachment fees charged by utilities controlled by municipalities or other public entities (such as electric co-operatives) that are exempt from regulation under the Pole Attachment Act of 1978.

Based on past FCC records and reports, ACA calculated that since October 2005, the number of cable systems has declined by 26% (from 7,208 to 5,312) and that for systems with fewer than 10,000 subscribers, the percentage drop in the number of systems was even greater. ACA acknowledges that the FCC's data likely reflected, in part, the loss of systems due to headend consolidation or the interconnection of multiple headends to achieve operating efficiencies. Nonetheless, ACA described this as important data concerning one of the three main types of providers in the video distribution market, and they should be included in the FCC's next report to give a complete picture of the state of video competition.

ACA's comments also offered data from the National Cable Television Cooperative (NCTC) showing the number of NCTC member systems that have shut down and ceased distributing video programming. The data showed that during the five years ending June 30, 2012, NCTC members closed a total of 793 small and rural cable systems serving a total of more than 35,000 customers. These are systems that have predominately ceased providing video service in their communities instead of consolidating headends. ACA noted that cable system closures not only resulted in the loss of multichannel video service, including some or all local TV stations, but also the prospect of broadband connections to the Internet.

ACA maintained that, taken together, the data highlighted the closures of many small cable systems and that the accompanying cessation of service to the community.  For that reason, ACA said the FCC should not only report on the decreasing number of cable systems, but also seek to determine and report on the number of small cable systems that have closed and left communities with no wireline MVPD option to provide service.

ACA also urged the FCC to undertake a careful analysis of small system shutdowns to determine whether market or regulatory circumstances contributed to the demise of these systems, and whether these closures serve as an early warning sign of impending problems for mid-sized and larger systems in denser areas.

About the American Cable Association

Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 850 smaller and medium-sized, independent cable companies who provide broadband services for more than 7.4 million cable subscribers primarily located in rural and smaller suburban markets across America.  Through active participation in the regulatory and legislative process in Washington, D.C., ACA's members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business.  For more information, visit http://www.americancable.org/

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