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Comcast/NBCU:ACA Says Baseball-Style Arbitration Condition is No Help

Amid talk at the FCC that the chairman could be circulating the Comcast/NBCU decision--approval with conditions--to the other commissioners as early as today or tomorrow, the American Cable Association was pushing against what it understands to be one of the conditions, on baseball-style arbitration, that is says does not help it.

In an ex parte filing on a Monday meeting with John Flynn, senior counsel to the chairman for transactions, ACA executives said they understood the FCC was proposing requiring outside arbitration on programming disputes, but one that would not make it a "usable remedy" for smaller operators.

ACA said its understanding was that Comcast-NBCU would be required by the FCC to reimburse smaller MVPD's for arbitration fees if Comcast lost, but not if it won. In any event, ACA has argued that baseball-style arbitration does not help its members, who are smaller and mid-sized operators without the deep pockets of the larger players.
ACA reiterated that to Flynn, "[O]ne-way fee shifting [Comcast pays if they lose] will only work if Comcast-NBCU actually believes there is a credible threat that a small MVPD will both take them to arbitration and win the arbitration, and this would only occur if an MVPD can precisely predict the result of the arbitrator's calculation of fair market value. However, in reality, small MVPDs cannot precisely predict such a result. Therefore, even with one-way fee shifting, the risk of losing an arbitration that costs $1 million and not being reimbursed remains a critical impediment, particularly for small MVPDs who are almost invariably risk-adverse."

ACA had asked that Comcast/NBCU not be allowed to charge more than 5% above the lowest price another MVPD was paying for an NBC station or Comcast regional sports network in a market, but suggested the FCC had decided against making that one of the conditions. "Should the Commission rely solely on one-way fee shifting to protect smaller MVPDs," said ACA, "they will once again be left with rights but no effective remedies, and the operators and their subscribers will bear the brunt of above-market programming price increases made possible solely by the combination of key programming and distribution assets of the applicants."

Comcast had no comment on whether it had signed off on any conditions or whether it thought an order was imminent. "[W]e can't comment on whether an order will circulate as that timing is up to the FCC," said a spokesperson. "We do continue to work closely with both the DOJ and the FCC."

An FCC spokesman had no comment.