Thursday, 26 July 2012

FCC Upholds Conclusion that Comcast Discriminated Against the Tennis Channel

A two-year dispute involving the cable tier placement of the Tennis Channel (not owned by Comcast) and the Golf Channel and Versus, recently renamed the NBC Sports Network, (both owned by Comcast) has been making its way through the FCC. This week,the majority of the FCC commissioners concluded that Comcast illegally discriminated in placing the Tennis Channel in a more limited and more expensive tier than the other two sports channels and ordered the firm to pay a fine and move the Tennis Channel to the same tier as the others.

The commission’s party-line 3-2 ruling by its Democratic majority upheld an administrative law judge’s conclusion that ordered Comcast to pay a forfeiture of $375,000 and required Comcast to carry Tennis Channel at the same level of distribution as Golf Channel and Versus. The ALJ also required Comcast to provide Tennis Channel with equitable treatment as to channel placement. The full commission ruling affirming the ALJ’s determination was the first time an MVPD was held liable under the law. The decision is lengthy, with a fair amount of space devoted to procedural issues.However, the areas of particular interest for sports and broadcast lawyers involve the determination of what facts justify a affiliation discrimination and the general First Amendment standards that should be accorded such cases.

The majority concluded that this policy unreasonably restrained the non-Comcast affiliated Tennis Channel from competing with the Comcast-affiliated Golf Channel, a violation of Section 616 of the Communications Act and its accompanying regulations. Such disputes are considered on a case-by-case basis and there are many factual questions that must be determined before concluding that competitive discrimination occurs.The majority, in upholding the ALJ, found that these conditions existed. Looking at the similarities in programming, ratings and demographics, along with circumstantial evidence, the majority concluded that discrimination due to affiliation existed. The opinion also discussed First Amendment considerations and concluded that since the anti-discrimination rules were based on “content-neutral” standards, the lesser intermediate scrutiny test would be applied. Citing earlier precedent involving cable television’s mandatory carriage requirements, the majority concluded that the test was warranted and that the it “easily” met the standard of a substantial governmental interest to prevent such unfavorable policies and that the rule was not burden substantially more speech than necessary.

The two dissenting commissioners contested the methodology of the majority’s conclusion about discrimination,noting the general cable industry practices involving the place of the Tennis Channel. It also issued a warning worth pondering: “. . . in order to shield themselves from discrimination complaints, Comcast and other MVPDs will be more likely to carry networks they do not want, on tiers with broader penetration,and at higher prices than ever before—at least if they are foolish enough to be willing to invest in content creation. And the Commission should not kid itself. These additional programming costs will come out of the pockets of consumers, not from MVPDs’ bottom lines.”

For the Tennis Channel, this is a huge shot in the arm. Comcast must now add Tennis Channel, currently available in 34 million homes nation wise, into an additional 18 million more households just weeks before the U.S. Open. This case will be appealed by Comcast and it is an important one to watch for cable operators, sports programmers and viewers.

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