Recent Program Carriage Decisions Seen Giving Advantage to Cablevision in GSN Carriage Case
A focus on the competitiveness of the video market in recent court decisions could indicate FCC program carriage rules are in trouble, and put the Game Show Network at a disadvantage in its upcoming showdown with Cablevision in an FCC administrative law judge hearing over channel placement, said several cable attorneys in interviews. Because judges’ opinions in this month’s Time Warner Cable case (CD Sept 5 p4) and May’s Tennis Channel case (CD May 29 p1) both pointed to a cable provider’s power in the market as a factor in determining whether the FCC can compel it to carry or how to carry a channel, GSN will have to go farther to prove that not being carried on Cablevision’s basic tier harms its ability to compete, said several cable attorneys. “All of these cases are good for the cable operators,” said Cohn and Marks cable attorney Ron Siegel, not connected to any of the cases. “The market is more competitive and cable isn’t as much of a bottleneck -- if you don’t have market power, there’s no need for [program carriage] rules."
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GSN brought a program carriage complaint against Cablevision in October 2011, after the operator moved it to a more expensive sports tier (CD Oct 14/11 p8). GSN argued the move was discrimination. The case has recently been on hold to wait for the resolution of the Tennis Channel and Time Warner Cable court cases. The precedents set by the cases might affect “the parties’ approach at trial in the instant action, and we expect to gain greater guidance as these matters progress,” Cablevision told FCC ALJ Richard Sippel earlier this month. With both cases resolved, the Enforcement Bureau said last week (http://bit.ly/1bpCZhw) that the GSN/Cablevision matter should be delayed further to “allow the parties to consider the implications of these rulings on their litigation strategies."
The FCC can enforce program carriage rules to prevent abuses from vertical integration only if a company has market power, said U.S. Court of Appeals for the D.C. Circuit Judge Brett Kavanaugh in his concurring opinion in Tennis Channel (CD May 29 p1). He concluded that because of video competition, Comcast -- a much larger company than Cablevision -- doesn’t have market power. In Time Warner Cable, Judge Reena Raggi said “increasing competition in the video programming industry” will undermine cable’s market power in the “not-too-distant future.” The decisions are “signal flares” that the courts don’t believe FCC program carriage rules reflect the current video market, said Davis Wright cable attorney Paul Glist, whose firm has represented Comcast.
Because of those precedents, it’s going to be harder for GSN to show that Cablevision has so much power in its market that moving GSN to a more expensive tier ruined its ability to compete, said a cable attorney who has represented large operators in carriage cases. The courts have “made it clear” they expect the FCC to look at competitive conditions in the marketplace when a plaintiff makes a showing of competitive impact, he said. Making Cablevision look overwhelmingly powerful in a marketplace where it competes with Netflix, Hulu, DBS providers and Verizon FiOS may prove difficult, said several cable attorneys. MoffettNathanson analyst Craig Moffett has called Cablevision’s potential for growth “permanently and irreparably impaired” because it has the most market overlap with FiOS of any publically traded cable company (CD Aug 15 p11). Attorneys for Cablevision and GSN didn’t comment.
Several cable attorneys said the entire program carriage regime is destined to be struck down in court as video continues to get more competitive. They said a court decision ending program carriage is more likely than a commission order doing away with the rules. “I don’t think the FCC has any interest in recognizing greater constitutional rights for cable,” said Glist. “Every day cable’s audience is going down while other video distribution is going up,” said Siegle, pointing to Raggi’s recommendation that the FCC reconsider program carriage. The FCC shouldn’t be in the business of telling a cable provider where a channel should go, said Glist. “That is an economic decision -- the commission should not be goosing the decision one way or the other.”
Not everyone thinks the focus on market power in recent court decisions spells the end for program carriage. “Courts say a lot of things in dicta,” said Public Knowledge Senior Staff Attorney John Bergmayer, saying he doesn’t think the judges are correct about the limits of FCC authority. Despite the points raised in the written opinions for Tennis Channel and Time Warner Cable, neither verdict was based on the FCC overstepping its authority to regulate the competitive video marketplace, Bergmayer said. In Tennis, the D.C. Circuit ruled that the FCC had failed to provide evidence that Comcast was discriminating against the channel by not carrying it on the same tier as the Golf Channel, while the commission’s standstill rule was vacated in Time Warner Cable on procedural grounds. Far from program carriage going away, Bergmayer said the standstill rule will likely soon come back. “I expect the FCC to revisit these rules,” he said.
The commission has a program carriage-related matter on the agenda for its Sept. 26 meeting: The carriage dispute between Bloomberg and Comcast. The dispute is about a condition of the Comcast/NBCUniversal deal that requires Comcast to place independent news and business channels in the same neighborhood of its programming guide where it carries other news and business channels, if it groups such channels together at all. Because the proceeding is restricted, FCC officials have declined to comment on it. “The cable carriage rules remain essential to preventing anticompetitive conduct and to promoting diverse programming,” said Bloomberg in a press release.