Prying Open the Cable Market

His boyish looks and relative youth have earned Federal Communications Commission Chairman Kevin J. Martin the nickname of "Harry Potter of the Beltway" among Washington insiders. But it would be a mistake to underestimate the 39-year-old Harvard Law School graduate.

Since he took over at the FCC last March, the soft-spoken but fast-talking Martin has notched a string of victories while navigating treacherous political waters. He won a unanimous vote to free DSL broadband services from traditional telephone rules. And he has green-lighted the historic mergers of two Baby Bells, SBC Communications and Verizon Communications, with their onetime long-distance rivals.

Now Martin has waded into another controversial issue: new competition in the cable TV market. Over the past few months, the FCC chief has made it known that he thinks his agency should make it easier for new entrants -- most prominently the phone companies -- to compete with cable and satellite providers in bringing video services to consumers.

"Clearly it's something the chairman is very interested in," says Anna-Marie Kovacs, analyst with Boston research firm Regulatory Source Associates. "I would expect they will act fairly expeditiously." BusinessWeek editor Spencer E. Ante interviewed Martin this week about video franchise reform. Here are edited excerpts:

Why did you create a rulemaking process about local franchising authorities last November?

Under the current law, a local franchising authority can't unreasonably deny a franchise to the incumbent. At the commission we started to hear reports about local authorities making it difficult for new entrants to enter the video business. We are trying to make sure we are doing everything we can to facilitate competitive entry.

Does the local franchising process work?

I'm sure there are instances in which it is working well. The point of our proceeding is to gather more information about the process and determine whether we should be putting additional parameters on it. It's not like we are gathering information to do nothing. We need to assess what is going on.

Some analysts and cable companies have told me that on this matter the FCC only has the power of the pulpit and does not have rulemaking authority to implement relevant sections of federal cable laws. Is that true?

The commission does have a role in determining what would be reasonable or unreasonable in the awarding of those competitive franchises. I think the commission does have some authority. Obviously, that's one of the reasons we started the proceeding.

What specifically can the FCC do?

Let me give you one example. There were allegations that local franchising authorities were not acting on applications to provide video service. We had a public hearing on this in Keller, Tex.

One of the questions I asked: Is there some time frame in which it would be reasonable that the local franchise authority act? One local official said yes, six months would be reasonable.

I think that's an example of where we could make a decision about what seems like a reasonable time frame to act or not act. Many of these issues get enforced in the courts. Even if we said it was reasonable to act in X amount of time, you still might go to court to enforce those limitations.

Does six months sound reasonable?

I don't know.

When do you expect the FCC will act?

We put out a notice and asked for people to comment. The reply comments were just filed this week. I think this is a priority for me. We first talked about this last August. We're going to act pretty quickly.

By end of summer?

It's hard for me to guess.

What do you think of the bill from Representative Joe Barton [R-Tex.] that proposes the creation of a national franchise for video service?

If Congress ends up taking some kind of action, then the FCC implements the law that Congress changes. We'll act accordingly.

Congress is considering a number of proposals that are different from ours. Some are talking about changing the law and making a national franchise. That's up to Congress to decide what to do.

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