FierceCable is wrapping up an eventful 2016 by taking a hard look at five of the most important trends and developments that emerged in the market this year. Today we look at federal oversight of the industry.
The news: The regulatory threat faced by the cable industry in 2016 played out a little like The War of the Worlds.
In the H.G. Wells classic, invaders from Mars launch what NCTA chief Michael Powell might call “a relentless government assault,” destroying every city on Earth, before they are suddenly — and quite surprisingly — stopped by the most unexpected thing.
Certainly, when Powell stood up on the final day of the final NCTA trade show in mid-May, and delivered a call to arms to address multiple ongoing FCC proposals that were highly unpopular within the cable industry, it didn’t look like FCC Chairman Tom Wheeler and his merry band of Democratic allies would stop soon.
"The FCC's mantra is competition, competition, competition," Powell said. "But from where we sit it means one thing: regulation, regulation, regulation."
"The policy blows we are weathering are not moderate corrections, they are thundering tectonic shifts," he said.
Wheeler, fresh off the passage of new net neutrality rules, kicked off 2016 by proposing radical changes to the pay-TV leased set-top business, changes that would have opened it up to third-parties like Google by giving them access to the information streams of pay-TV providers.
He followed that up by proposing that ISPs be more tightly regulated, and that providers of business broadband get a closer look, too.
The cable industry began to turn its gaze to Google and its tight relationship with the Obama White House. Cable industry denizens made jokes at NCTA about Google’s Eric Schmidt taking up residence in the West Wing.
But with Hillary Clinton strongly favored to win the White House, it didn’t look like Wheeler would be through with the cable industry anytime soon.
Of course, as we all shockingly found out on Nov. 8, 2016, Wheeler was, in fact, done. Just a month after Donald Trump’s electoral victory, Wheeler announced that he’d leave his post in January.
Speaking to investors earlier this month, Charter Communications Chairman and CEO Tom Rutledge called the sudden regulatory sea change “cool.”
Will Google’s Schmidt have to move out of the West Wing? Rutledge was asked.
“Maybe he’ll move to Trump International,” he responded.
Why it’s important: With net neutrality, set-top reform and a host of other regulatory problems seemingly off the table, at least for the next four years, analysts like MoffettNathanson’s Craig Moffett began moving cable companies like Charter from “neutral” to “buy.”
“Broadband price regulation has long been our No. 1 risk to cable stocks,” he said in a note to investors last month. “A legislative (rather than administrative) solution could eliminate the risk of broadband rate regulation not just for the duration of the Trump presidency … but for years to come.”
Cable operators, he added, will be able to price video on their networks as they see fit.
“Even the risk of OTT video substitution is now largely neutralized, as cable operators will now more likely be able to price OTT video transport explicitly, either through usage-based pricing or simply through higher stand-alone broadband prices, directly offsetting any risks to the video profit pool,” Moffett said.