By Neema Trivedi[1]
If you are a Comcast cable subscriber, you likely receive Comcast’s wholly-owned sports networks, the Golf Channel and Versus (recently re-named NBC Sports Network). This means you can watch golf, hockey, or even bull-riding or cagefighting. Those networks are easy to find on Comcast’s channel lineup — in D.C., for instance, they are channels 11 and 7, just two slots away from ESPN.
But if you are a tennis fan, you need to pay $5 to $8 more to buy Comcast’s sports package in order to receive the Tennis Channel, a 24/7 cable sports network airing tennis and tennis-related events. And you are less likely to find it — in D.C., the network is carried on channel 735, 726 slots above ESPN. But based on a recent ruling from a Federal Communications Commission administrative law judge (ALJ), that could change.
In an Initial Decision released in December, the FCC’s Chief ALJ concluded that Comcast discriminates against the unaffiliated Tennis Channel in favor of its affiliated networks, the Golf Channel and Versus, on the basis of affiliation.[2] That discrimination, in turn, “unreasonably restrain[s] [Tennis Channel’s] ability to compete fairly.”[3]
The complaint, filed by the Tennis Channel over two years ago,[4] was brought under a provision of the Communications Act aimed at curbing anticompetitive behavior among cable distributors and at promoting diversity in video programming. The landmark decision in Tennis Channel v. Comcast is the very first of its kind — the first in which a programming network successfully asserted its rights under Section 616 of the 1992 Cable Act — thereby reinvigorating a statute that has been virtually unenforced since its passage twenty years ago.[5]
Section 616 of the Communications Act:
Section 616 prohibits vertically integrated cable operators like Comcast (i.e., distributors that own both their own content and the distribution channels through which television programming is made available to viewers) from discriminating on the basis of affiliation. Congress determined that vertically integrated cable operators have the “incentive and ability” to advantage their own networks by distributing them widely to their customers and to disadvantage unaffiliated networks by limiting their distribution.[6]
A network can prove a Section 616 violation by showing that it is “similarly situated” with the defendant cable operator’s affiliated networks — for example, that the networks compete for viewers, advertising, and programming, and have generally comparable ratings — and yet is treated differently with respect to the terms and conditions of its carriage.[7]
Comcast, the Nation’s Largest Distributor:
Comcast is the nation’s largest video programming distributor, serving approximately 23 million subscribers.[8] Like most cable companies, it offers video programming to customers on different service levels. It carries the Golf Channel and Versus on its best level of service, distributing those networks to almost all of its digital subscribers. Its partially-owned networks, the NHL and MLB Networks, are carried on the next best level. The Tennis Channel, in which Comcast has no ownership interest, is carried on the pay-extra sports tier, which reaches only a small fraction of Comcast’s subscribers. No Comcast affiliate is carried exclusively on this tier.[9]
A network’s level of distribution is critical to its success. Most cable networks are paid by distributors on a per-subscriber basis, so the more subscribers a network reaches, the more it makes in licensing revenues. And with greater distribution, a network is better able to compete for high-profile programming rights, advertising dollars, and new viewers. With limited distribution, all these critical elements of a network’s business are threatened.
The Tennis Channel v. Comcast Decision:
The Tennis Channel launched in 2003 and signed a carriage deal with Comcast in 2005. Under that deal, Comcast decided to carry the network on the sports tier. The Tennis Channel spent the next four years building up its service, adding premium content (like rights to portions of all four Grand Slams), launching a high-definition service, and hiring well-recognized talent. It then approached Comcast in 2009, seeking broader carriage that would match its improved service offering. Comcast denied that request, opting to keep the Tennis Channel on the sports tier while carrying its own networks at higher distribution levels.[10] It was on these facts that the Tennis Channel filed a complaint in early 2010.
The Presiding Judge concluded that Comcast violated Section 616 and ordered it to carry the Tennis Channel on equitable terms relative to the Golf Channel and Versus.[11] He found that all three networks were similarly situated and close competitors: “Each . . . provides year-round sports programming and attracts similar types of viewers, i.e., predominantly male, affluent adults within the same overlapping age ranges.”[12] They also “target the same advertisers” and have “remarkably similar ratings.”[13]
Nonetheless, Comcast gives the Golf Channel and Versus “more favorable channel placement” than it gives the Tennis Channel, and it “carries Golf Channel and Versus far more broadly than . . . Tennis Channel.”[14] The Judge rejected Comcast’s explanations for these disparities, concluding instead that Comcast’s decisions were based solely on affiliation.[15] For instance, he noted, Comcast’s “practice is to transmit affiliated sports networks more broadly than unaffiliated sports networks.” [16] Indeed, its own executives acknowledge that affiliated networks “get treated like siblings as opposed to like strangers.”[17]
Finally, the Judge found that Comcast’s discrimination seriously harms the Tennis Channel’s ability to compete for subscriber fees, new viewers, advertising, and programming rights.[18] And as the nation’s largest distributor, Comcast’s decision to deny broad carriage to the Tennis Channel has a “strong influence on other [distributors],” which often follow Comcast’s lead.[19]
The Presiding Judge ordered Comcast to remediate its discrimination “as soon as practicable,”[20] requiring it to carry the Tennis Channel “at the same level of distribution that it carries Golf Channel and Versus” and provide it with “equitable treatment . . . as to channel placement.”[21] He also imposed the maximum forfeiture amount of $375,000 on Comcast for its “serious violations of [the] law.”[22]
The Need for Program Carriage Regulation:
In this litigation, and in a related FCC rulemaking proceeding, Comcast has argued that Section 616 was enacted to address a problem that no longer exists. The marketplace now, it contends, is sufficiently competitive, making government regulation unnecessary.[23] But the Commission rejected these arguments last summer, noting that the “substantial government interests in promoting diversity and competition [in video programming] remain.”[24] The Commission said that cable operators still have the incentive and ability to favor their affiliates, and it pointed to the recent Comcast – NBC Universal merger to “highlight[] the continued need for an effective program carriage complaint regime.”[25] The Tennis Channel decision — and the Judge’s express findings of discrimination — underscore the Commission’s judgment that program carriage regulation is still warranted.
At its core, the Tennis Channel decision — and the statute it enforced — impose a clear mandate: Comcast cannot treat its networks better simply because it owns them. Nor can it justify its actions on cost alone. Comcast has argued that carrying the Tennis Channel broadly would cost more than keeping it on the sports tier.[26] Borrowing from other discrimination contexts, the Judge rejected that defense: “An entity . . . cannot avoid complying with an anti-discrimination statute on grounds of the costs incurred to eliminate the discrimination.”[27]
Since the decision was released, the Tennis Channel has petitioned the Commission to compel Comcast’s compliance with the Judge’s carriage and channel placement remedies, Comcast has petitioned for a stay of the Judge’s order, and the matter is on appeal to the full FCC. [28]
[1] Neema Trivedi is an associate with Covington & Burling LLP, counsel to The Tennis Channel, Inc. (“Tennis Channel”).
[2] The Tennis Channel, Inc. v. Comcast Cable Comms., LLC, Initial Decision of Chief Administrative Law Judge Richard L. Sippel, MB Docket No. 10-204, File No. CSR-8258-P, 11D-01, at ¶¶ 105-14 (rel. Dec. 20, 2011) [hereinafter “Initial Decision”].
[3] Id. ¶¶ 115-16 (internal citations omitted); see also 47 U.S.C. § 536(a)(3); 47 C.F.R. § 76.1301(c).
[4] Program Carriage Complaint, MB Docket No. 10-204, File No. CSR-8258-P (Jan. 5, 2010).
[5] A small number of other sports networks have filed program carriage complaints under Section 616, including the NFL Network and the Mid-Atlantic Sports Network. See NFL Enterprises LLC v. Comcast Cable Communications, LLC, Program Carriage Complaint, MB Docket No. 08-214, File No. CSR-7876-P (May 6, 2008) (settled); TCR Sports Broad. Holding, L.L.P. d/b/a Mid-Atlantic Sports Network v. Time Warner Cable Inc., 25 FCC Rcd 18099 (2010), appeal docketed, No. 11-1151 (4th Cir. Feb. 22, 2011) (appeal pending).
[6] Cable Television Consumer Protection and Competition Act of 1992, S. Rep. No. 102-92, at 25 (1991); see also Leased Commercial Access; Development of Competition and Diversity in Video Programming Distribution and Carriage, Second Report and Order, MB Docket No. 07-42, FCC 11-119, at ¶ 33 (rel. Aug. 1, 2011) [hereinafter “Second Report & Order”].
[7] Second Report & Order ¶ 14; Initial Decision ¶ 105.
[8] Initial Decision ¶ 7.
[9] Id. ¶¶ 12-14.
[10] Id. ¶¶ 5, 16, 19, 23.
[11] Id. ¶¶ 119-24, 126-27.
[12] Id. ¶ 24.
[13] Id. ¶¶ 24, 48.
[14] Id. ¶¶ 53-54.
[15] Id. ¶¶ 62-78.
[16] Id. ¶ 57.
[17] Id. ¶¶ 55, 108.
[18] Id. ¶ 116.
[19] Id. ¶ 63.
[20] Id. ¶¶ 126-27.
[21] Id. ¶¶ 119-20.
[22] Id. ¶ 118.
[23] See, e.g., Comcast’s Exceptions to Initial Decision, MB Docket No. 10-204, File No. CSR-8258-P, at 9 (Jan. 19, 2012); Revision of the Commission’s Program Carriage Rules, Comments of Comcast Corporation, MB Docket No. 11-131, at 7-17 (Nov. 28, 2011).
[24] Second Report & Order ¶ 33.
[25] Id.
[26] Initial Decision ¶¶ 75, 114.
[27] Id. ¶ 114 & n.338 (citing City of L.A. Dep’t of Water v. Manhart, 435 U.S. 702, 716-18 (1978); EEOC v. Indiana Bell Tel. Co., 256 F.3d 516. 523-24 (7th Cir. 2002).
[28] See Tennis Channel’s Petition to Compel Comcast’s Compliance with Initial Decision (Jan. 13, 2012); Comcast’s Conditional Petition for Stay (Jan. 25, 2012); Comcast’s Exceptions to Initial Decision (Jan. 19, 2012).
