Extending Program Carriage Rules to Unaffiliated MVPDs Backed by Indies, Opposed by MVPDs

Indies and operators disagreed over the import of the fact that no program carriage complaint has been granted in favor of an unaffiliated channel and against an operator. Operators see that as evidence that there’s no discrimination, while indies contend a drawn-out and expensive complaint process has dissuaded complaints from being filed. “The most reasonable conclusion that could be drawn from these facts is that the problem that Congress intended to address when it enacted the program carriage provisions of the Cable Consumer Protection and Competition Act of 1992 was -- or at least soon became -- illusory,” the NCTA said (http://xrl.us/bmjsw2). “It is not surprising that there have been few complaints and no adjudicated violations of the rules” given the number of MVPDs that have entered the business in the last two decades, the association said. “The Commission has, however, reached a different -- less plausible -- conclusion. It has accepted at face value the contention of some programming vendors ’that the lack of complaints is a direct result of our inadequate procedures, not a lack of program carriage claims.'"

That no indie has prevailed is “strong evidence that the complaint process is fundamentally broken and that independent programmers do not perceive that it provides them with meaningful protection from MVPDs’ discriminatory practices,” said Bloomberg LP, owner of a financial news channel. It has contended Comcast hasn’t lived up to terms of this year’s FCC order approving Comcast’s purchase of control in NBCUniversal because it puts Bloomberg TV on channels far away from other news networks. “The Commission should interpret the discrimination provision in Section 616(a)(3) broadly to preclude any MVPD from discriminating on the basis of a program vendor’s lack of affiliation with another MVPD or integrated programming network,” said Bloomberg. “If a cable operator discriminates against an independent programmer in favor of another cable operator’s integrated programming, this should be found to violate the Act.” The comments (http://xrl.us/bmjsxg) listed former FCC Chairman Kevin Martin, now of Patton Boggs, among the lawyers who wrote it.

The FCC could violate the First Amendment by extending or expanding program carriage rules, said NCTA, DirecTV and others. “When Congress enacted provisions prohibiting MVPDs from discriminating on the basis of ‘affiliation,’ it made absolutely clear that it considered affiliated programming vendors to mean those in which the MVPD had an attributable financial interest,” the association said. “Yet the Commission now proposes to extend the prohibition to discrimination by an MVPD in favor of a program network that is affiliated with another MVPD. And it proposes even to prohibit an MVPD from discriminating in favor of groups of programming networks that are affiliated with no MVPD but are affiliated with each other."

Of most concern to DirecTV in the NPRM is the proposal to allow an indie to assert it was discriminated against by an MVPD favoring a channel affiliated with another seller of TV service. “This proposal is based on an assumption that vertically integrated MVPDs will collude to favor each other’s programming at the expense of independent programming. Yet that assumption runs directly counter to nearly two decades of Commission precedent and factual findings,” the DBS company said (http://xrl.us/bmjsx3). It pointed to a case involving Time Warner Entertainment where the U.S. Court of Appeals for the D.C. Circuit held the FCC didn’t show the possibility of such discrimination occurring. “No such evidence exists today, so nothing in this record supports a different result now,” DirecTV said. “Nothing in the record even begins to support expanding the unproven collusion hypothesis to include DBS and telco video operators that compete directly with cable.”

The FCC was right to propose to exclude newer MVPDs, Verizon said (http://xrl.us/bmjsyb). “The Commission correctly concludes in the NPRM that the new entrants who compete against vertically-integrated cable incumbents should be exempt from any expansion to the existing program carriage rules, including any new rules addressing good faith negotiation requirements or expanding the scope of existing nondiscrimination requirements."

Five programmers said the FCC should extend program carriage rules to more types of MVPDs. They included the owner of the NFL Network and the Game Show Network and Tennis Channel. The NFL Network had a program access case against Comcast, later settled, before an FCC administrative law judge in 2009, while GSN has one pending before Cablevision and the Tennis Channel has one against Comcast. “Even MVPDs that own no programming interests can discriminate in favor of programming on behalf of a third party,” HDNet said (http://xrl.us/bmjsyj). “The common practice of wholesale tying or bundling, and agreement by MVPDs to accept it, is a form of discrimination on the basis of affiliation of programming networks."

The three networks with recent complaints and Current TV said the rules should recognize that MVPDs favor each other’s affiliated channels. “Networks affiliated with MVPDs enjoy special benefits by virtue of their affiliation. Not only do they receive benefits from the MVPDs that own them, but they also can benefit from reciprocal carriage arrangements, even tacit ones, with other MVPDs,” the four indies said (http://xrl.us/bmjsyu). “Cases of such discrimination can be expected to be difficult to prove. But when a well-founded prima facie case is presented that demonstrates the existence of this kind of discrimination, the other MVPD’s affiliate should be treated as though it is affiliated with the defendant for the balance of the proceeding, including for the purpose of discovery.”