AT&T Looks for Loophole in ‘Terrestrial Loophole’
The FCC should require Cox to license a programming service that carries San Diego Padres baseball games to AT&T’s U-verse IPTV service -- although the network is delivered over fiber, AT&T said in a complaint filed Thursday. Typically, networks like Cox’s Channel 4 San Diego, and a handful of other cable-owned regional sports networks that don’t touch satellite transponders, aren’t covered by rules that call for vertically-integrated programmers to deal fairly with competing pay-TV operators. Critics call this the “terrestrial loophole.”
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But the FCC can order Cox to make its programming available to AT&T without taking up that question, the telco argued in its complaint. Relying on section 628(b) of the Communications Act -- the law that the commission cited when it blocked cable operators from reaching exclusive service agreements with apartment building owners (CD Nov 2 p3) -- the commission can bar Cox from withholding the programming because it hurts competition for video service, AT&T said. The section lets the FCC take “whatever reasonable steps may be necessary to protect and increase ‘competition and diversity,'” among pay-TV services, AT&T said.
Cox disagreed. “AT&T’s claims of unfair competition are unjustified and directly contradict the marketplace reality of fair competition,” a spokesman said. Exclusive contracts are common in media and telecommunications, he said, citing DirecTV’s carriage of the NFL Sunday Ticket and AT&T’s deal to offer Apple’s iPhone. “Our distribution of the Padres content is entirely consistent with applicable law and regulations,” the spokesman said. “We are not required to share the benefits of Chanel 4 San Diego and its Padres content with AT&T.”
Without Padres games and Cox’s sports network, AT&T has struggled to attract and keep customers for its IPTV service, it said. Though it won’t disclose figures, it said monthly sales in San Diego are proportionally lower than its company average. Prospective customers tell door-to-door sellers that they won’t sign up for U-verse because they want to keep watching Padres game. And “AT&T’s disconnect ("churn” rate) in San Diego has been significantly higher in every single month of operations than in other area,” it said.
AT&T isn’t the first to raise section 628(b) in support of access to terrestrially-delivered programming. DirecTV cited the section in its comments filed in the agency’s program-access rulemaking. DirecTV pointed as precedent to the same FCC order banning exclusive service contracts. But AT&T may be the first to raise the argument a complaint rather than a rulemaking. “The complaint need not and does not seek to have the Commission close the so-called ’terrestrial loophole,'” AT&T said. “Withholding of this particular terrestrially-delivered programming directly depresses competition for satellite-delivered video programming in San Diego,” it said.