It was deja vu at the Federal Communications Commission Tuesday as two of the three commissioners dismissed claims that FCC-ordered cable TV rate cuts prompted the demise of the second huge cable/telco partnership this year.
Shrugging off Southwestern Bell and Cox Cable’s assertion that the “new regulatory environment” resulted in a collapse of the $ 4.9 billion alliance, commissioner James Quello said it “serves their purpose to blame regulation. It’s nice for regulated industries to blame regulators for failed ventures.”
Quello’s comments were softer than those he made in February after Bell Atlantic and Tele-Communications Inc. called off the biggest telecommunications merger in history and blamed their action on FCC cable rate rollbacks of 17% (Daily Variety, Feb. 24).
Quello said the FCC must allow “reasonable growth and profitability for cable” so the industry can compete with the telcos. Nevertheless, he was skeptical that the new FCC rules are primarily responsible for the demise of the deals.
“I think part of (the reason the deals were called off) is that phone companies have decided they are not going to pay excessive rates for cable companies, especially when they’ve got their own capability to build fiber,” Quello said.
FCC chairman Reed Hundt agreed, saying: “Occasionally parties in negotiations will disagree on price. In a growing, developing industry, this is not unusual.”
Hundt said the new FCC cable rules “in no way put an end to new ventures in the telecommunications area,” which he said “continues to be a vibrant, growing and dynamic portion of the American and world economy.”
The cable regs “are fair to subscribers, who will pay reasonable rates, and fair to cable operators, who have strong incentives for investment and innovation,” Hundt claimed.
Of the three FCC members, only commissioner Andrew Barrett seemed willing to accept the notion that FCC cable rate regulation could be killing telco/cable megamergers. He said the decision to call off the Cox/Southwest Bell deal “reflects the assessment by those parties of the impact on their specific venture, as well as their analysis of other relevant considerations.”
An aide to Barrett noted the new FCC rate rules undoubtedly will have a “material impact” on the cash flow of cablers. That comment was echoed by one FCC staffer, who asked, “How could what we did not have an impact?”
For its part, Bell Atlantic declined the opportunity to again blame the FCC for killing its deal with TCI. “We’ll reserve comment on it,” said a Bell Atlantic spokeswoman.
