FCC HANDS TIME WARNER VICTORY IN MUST-CARRY DISPUTE WITH GEMSTAR
FCC said Time Warner Cable’s analog must-carry obligations didn’t require company to carry Gemstar-TV Guide International’s electronic program guide. Commission said decision didn’t preclude companies from entering into commercial agreements that would involve carriage, and companies said they were in negotiations to that end. Agency used 3-pronged test to determine whether material carried in vertical blanking interval (VBI) of local broadcasts was program-related and therefore required cable carriage: (1) Is information intended to be seen by same viewers who are watching main program? (2) Must information be available during same interval of time as main program? (3) Is information integral part of main program? Commission ruled 4-0 that answer to questions was “no” on all counts.
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FCC stressed that decision was limited to analog signal, and only to 2 companies involved, but nevertheless it triggered speculation whether broadcasters could win digital carriage of ancillary services such as stock quotes and other data piggybacked on their signals. Gemstar’s Guide Plus+ chip is built into TVs and VCRs that have licensing agreement with Gemstar. Data for updating program listings are sent 4 times each day through VBI signal of analog over-air broadcast stations in each market. Consumers don’t see downloads, but by receiving them invisibly can get latest information about what’s on TV and where they can find it. Broadcasters earn money from Gemstar by piggybacking Gemstar’s data onto their own signal. Without those programming updates, guide wouldn’t work.
Problem began when TW started stripping material out of broadcast signals, resulting in March 2000 complaint by Gemstar. Gemstar claimed TW was trying to get subscribers to use its own program guide, but TW said guide material wasn’t entitled to mandatory carriage under FCC rules. While FCC and FTC were reviewing then-proposed merger of AOL and TW, TW in June 2000 reversed its carriage decision and has been carrying Gemstar’s guide material ever since. Once TW did that, Gemstar withdrew its petition, but TW sought ruling.
FCC said “very little” of Gemstar’s material was uniquely related to main program broadcast station was carrying at time, but instead was information on programming on other channels, ads and other promotions that didn’t relate to any program. “Naturally, we're pleased with the FCC’s decision. We look forward to productive discussions with Gemstar,” TW Cable spokesman said, and company has “no plans” to begin stripping material out again. Gemstar spokeswoman declined to comment, but in recent conference calls Gemstar CEO Henry Yuen and co-Pres. Peter Boylan indicated that all new agreements with MSOs provided for full support of Gemstar’s consumer electronics product in TVs and VCRs. Gemstar still is negotiating with merged AOL-TW.
FCC spokeswoman said ruling was limited to that specific case, but analyst Gary Arlen said he believed it had much wider implications. FCC is examining cable’s obligations to carry digital TV broadcasts, and cable operators, not surprisingly, believe they should have right to determine what they deliver to their subscribers. Broadcasters, meanwhile, would like to earn money for delivering ancillary services. Arlen said ruling “at least set(s) a groundwork for a next wave of debates” about must-carry. “It may not be a precedent, but the lawyers who want to make it a precedent will try to carry it over into the digital requirement,” he said. Cable industry insiders celebrated FCC ruling as victory, saying if decision had gone other way, “it would have been a can of worms” for cable MSOs. “We're pleased the FCC rejected Gemstar’s effort to use the must-carry law as a regulatory shoehorn for free carriage,” NCTA Senior Vp.-Legal Dan Brenner said: “The negotiating table is the right place to resolve this issue.” NAB spokesman Dennis Wharton declined to comment.