This Associated Press article declares that cable companies will charge customers more for set-top receivers because of the FCC’s new rules requiring video providers to deploy receivers containing separable security (i.e., detachable CableCARDS), as opposed to the current embedded security. The article declares the increases due to the new FCC rules are a sure thing (“Higher rates are definitely coming,” it proclaimed). At Cox, we will fully comply with the FCC separable security mandate and we have no plans at this time to raise prices on receivers due to the mandate. However, increasing costs may be passed on to customers in the future due to the cost of compliance.

Also in the article, several cable players criticized the FCC’s decision late last week, just before the July 1 effective date, to deny Cable’s petition for an exemption, but granting a temporary exemption to Verizon and other video providers. The National Cable & Telecommunications Association (NCTA) said in a statement: “The Commission’s 11th-hour action on the many long-standing waiver requests doesn’t bode well for consumers. There’s nothing in these decisions to stave off a $600 million set-top box tax likely to affect the great majority of cable customers while providing no benefit to consumers. In addition, customers are being treated differently based on the provider to which they subscribe, the unfortunate outcome of a flawed process.”

FCC Chairman Kevin Martin testified before the Senate Commerce Committee’s Oversight Hearing On Telecommunications Issues earlier today. Addressing the price of basic cable, Martin said it has “gone up at a disproportionate rate...when compared against over communications sectors.” (Click here for his complete remarks.) In response, the National Cable & Telecommunications Association released the following statement: “A real analysis of today’s marketplace shows the actual price of cable’s bundle of video, Internet and telephone services is 20 percent lower than the price of the same package of services 10 years ago. Chairman Martin's comments reflect an outdated, incomplete and wholly inaccurate analysis that doesn't reflect the realities of today’s marketplace, where consumers enjoy more competition, greater choice and better services than ever before.”

The FCC voted along party lines, 3-2, to treat service providers differently in video franchising. The Commission didn’t release an order, and likely won’t for several weeks, so we can’t comment on all of the details. But based on what has been reported, it’s a disappointment that the FCC appears determined to create an uneven, unfair playing field slanted decidedly in the telcos’ favor. Of course, it’s far from a done deal, with lawmakers questioning the FCC’s authority on the matter and cities likely to sue. (Here’s the official NCTA response.)

The other matter on the FCC’s meeting agenda was release of the 2005 cable pricing survey. No surprise there, since details had been leaked for months. NCTA head Kyle McSlarrow on Tuesday called the study “almost entirely useless as a foundation for any policy decision.” Although we haven’t seen the full report, based on the data that have been released, the conclusions of the study just aren’t true for Cox Communications. The FCC’s chief contention is that speeding the entry of AT&T, Verizon and other large telcos into the cable business will reduce prices. Truth is, Verizon and AT&T’s video services are already priced well above $35.94, which is the FCC-reported average price of cable in markets with at least two wireline competitors. Verizon’s FiOS service is $47.98 ($42.99 + $4.99 for a required converter) and AT&T’s U-Verse starts at $59. The FCC’s report claims that cable prices in markets with video competition from the telcos are about 20% lower (or $7) than in markets without telco video. Again, in Cox markets at least, that’s just not the case. Our prices in competitive markets aren’t distinctly different – only about 3% lower than in other markets. So, our prices are essentially the same whether we’re competing directly against satellite or telco video.

Kyle McSlarrow, president of the National Cable & Telecommunications Association, didn’t hold back in a year-end media briefing earlier today. His ire was directed toward the FCC and his timing surely was not coincidental. The Commission is set to meet tomorrow and is expected to release the ’05 cable price survey and to take action on new rules that could further ease franchising requirements for AT&T, Verizon and other telcos entering the video business.

Addressing the price survey, McSlarrow said, “It is unclear to me why a report that was clearly finished at the beginning of this year was kept under wraps or why it has been subject to selective leaks of information.” He further derided the report as “almost entirely useless as a foundation for any policy decision,” noting that the data in it are almost two years old. He further declared it “severely limited” in its focus only on analog expanded basic cable, which ignores the reality that most cable customers subscribe to digital and that satellite TV providers DirecTV and Dish Network have significant video market share, yet are excluded from the report. Of the satellite competitors, McSlarrow noted that they have aggressively increased their prices, as has Verizon. As for the so-called Section 621 proceedings the FCC is expected to address tomorrow, McSlarrow said, “Based on what we know, I think it’s a proposal that has to be dramatically pared back. The case has been made by the telcos that they’re being held back from getting franchises. There’s no evidence in the record at all to support that.”

Early in his remarks, McSlarrow exasperatedly declared that the current agenda of the FCC “represents one of the most sweeping regulatory examples of government micromanagement.” Asked later by a reporter if FCC Chairman Kevin Martin has a grudge against the cable industry, he replied, “You’d have to ask him. All I can say is I just think there is a fundamental misunderstanding of what actually our industry is doing. It’s almost like they are moving through a time warp.” How misunderstood? How far into a time warp? Stay tuned for news out of the FCC meeting tomorrow.