FCC Hears Skeptical Questions from Three Judges on Tennis Channel Order Against Comcast

It seems likely the agency will lose Comcast v. FCC, said those who heard the oral argument and who support the order, oppose it and have no stake, in followup interviews. They said the question is whether the D.C. Circuit tosses the order based on the statute of limitations, progresses to whether Comcast deciding not to give equally wide carriage to the Tennis Channel as the operator’s own sports networks was anticompetitive, and, if found anticompetitive, addresses the free-speech issues. The D.C. Circuit earlier issued a rare stay of the order (CD Sept 4 p2).

Questions in oral argument mainly concerned the statute of limitations, potential anti-competitiveness of Comcast’s carriage decision and the costs the operator would face if required to put the Tennis Channel on a more broadly subscribed-to package of cable channels. Williams quickly steered Comcast’s lawyer, Miguel Estrada of Gibson Dunn, away from the First Amendment issues the appellate attorney initially raised in his opening argument. Williams suggested Estrada focus on statutory issues, and the lawyer mostly did that. After that initial exchange, the argument didn’t much cover the First Amendment implications of Section 616 of the 1992 Cable Act. Questions covered a 1999 program carriage order, which courtroom observers said later was the last set of general rules from the FCC on the subject before the Tennis Channel’s complaint.

Estrada said the D.C. Circuit and Supreme Court have found editorial discretion is protected by the First Amendment, at one point saying an analogous decision was how widely a newspaper could carry a freelancer’s story versus one written by R.W. Apple of The New York Times. The FCC dismissal of the Mid-Atlantic Sports Network’s program carriage complaint against Time Warner Cable, which was upheld last year by the 4th U.S. Circuit Court of Appeals (CD May 15 p15), came as TWC carried MASN similarly to other multichannel video programming distributors, Estrada said. Comcast contends the Tennis Channel isn’t carried as widely on other MVPDs as it seeks on Comcast. “Comcast carries its networks at levels that exceed the levels on other MVPDs, and it carries Tennis Channel markedly below what Tennis Channel has secured in the market,” Tennis Channel said in its final brief in the case, in docket 12-1337.

Williams also asked about the possible financial harm to making Comcast pay the Tennis Channel a higher per-subscriber fee so it’s available in more households buying Comcast cable than the sports tier where the network now resides that costs an extra fee. “Comcast will have to pay a large sum of money, which I cannot mention” because the figures aren’t public, Williams said. “Either way, as I understand the brief, Comcast pays a tremendous amount of money.” Karanjia said Comcast could move its own channels to the sports tier where the Tennis Channel now resides, and in doing so not pay the indie more money. The indie costs less to carry on a per-ratings point basis “by orders of magnitude,” he said.

Kavanaugh asked questions about how to measure if Comcast’s decision to carry its Golf and Versus networks more widely than the Tennis Channel was anticompetitive. “The problem as I see it here” lies with unreasonable restraint, Kavanaugh said. He noted vertical integration can be “pro-competitive generally.” Karanjia replied that it depends on the case. Williams then asked the FCC’s attorney about his theory of “putting the burden on the regulated entity” -- Comcast.

Edwards asked several questions of Karanjia about how the order could possibly be valid, because the Tennis Channel’s January 2010 program carriage complaint came after the network began being carried on Comcast’s sports tier in 2005. Edwards read from a previous commission order, saying it “makes it absolutely clear” that changes in distribution after a deal is signed don’t constitute a new offense. “This rule is absolutely dispositive,” the jurist said. “You can’t come up anytime, 8 or 10 years later, and say we hate the contract.” Karanjia replied that was “absolutely true.” Edwards then said he’s “gone back over this a number of times. You signed a contract. The contract controls.” The way Karanjia said the concept of laches, or the right to seek redress, applies in the case “is totally inconsistent with what you did” many years ago, in terms of agency rules. Karanjia agreed about the complaint’s timing, but later told Edwards that “at no time did Comcast ever fess up to its discrimination” of the Tennis Channel, by instead contending the difference in how widely that network and the operators’ are distributed as “pro-competitive."

"Given that the judges were all over the place, one thing that’s pretty clear is that Comcast is going to win,” said public interest communications lawyer Andrew Schwartzman, who has consulted for a party interested in the case but not participating in it. “But I can write 10 different scenarios.” Schwartzman and others who heard oral argument said it was notable for the jurists’ one-sided questioning in that they didn’t try to poke nearly as many holes in Comcast’s case as they did for the FCC. The Tennis Channel thinks “the FCC made the right decision based on the merits of this case,” a spokesman said. Bureau and Comcast spokeswomen declined to comment.

Williams’ comments directing Estrada away from the First Amendment issues in Comcast point up that appellate courts address constitutional issues only if they uphold the statutes, lawyers who heard oral argument told us. But they also noted that Kavanaugh said the case had a “First Amendment backdrop,” and so free-speech issues could also be raised. Karanjia asked the court to give the commission the opportunity to show market power is at issue with Comcast’s carriage decisions. He said there were “clear provisions,” which prompted Kavanaugh to ask: “so clear?”

Even if the Media Bureau changed policy in an earlier ruling in another program carriage case, Edwards later told Robert Long of Covington & Burling, representing the Tennis Channel, that “you've still got a notice issue” in Comcast. Edwards asked if the commission disclosed a rule change. Long said he tried to make his case, to which Edwards replied “you've given it your best shot.” Long noted in an exchange with Kavanaugh that Comcast didn’t produce a cost-benefit analysis showing why it made financial sense to not carry the Tennis Channel more widely. “That is, first of all, suspicious,” Long said. “We think there’s overwhelming evidence of discrimination,” he said in a later exchange with Williams.

Oral argument was “extremely negative to the FCC,” said cable lawyer William Johnson, who helped write the 1999 program carriage rules and has consulted for Comcast. “I didn’t hear anything supportive of the FCC at all.” Often in oral argument, after judges have “beaten up on the FCC, they try the other side, but they didn’t seem to do very much for the Estrada side of it,” continued Johnson, a former deputy bureau chief. Though the caveat after oral argument is it doesn’t dictate a case’s outcome, “boy, this one sure sounded like you could figure it out from the questions,” Johnson said. “It seemed like a very strong case for Comcast, on three or four different levels."

It’s unclear on what merits Comcast will win the case, but a victory seems likely, said Free State Foundation President Randolph May, who disagreed with the order (CD Feb 21 p23). It seems Edwards “believes that the case is barred by the statute of limitations,” while the other two jurists may decide the commission didn’t show Comcast unreasonably restrained competition based on affiliation, May said. “My prediction is that they are likely therefore not to reach the merits of the constitutional claim per se, but they might well use the ‘backdrop’ as they referred to it of the First Amendment claim as a reason for construing the statute in a way that’s different than the way the Tennis Channel and the FCC present the statute.”