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D.C. Circuit Court Denies Cablevision/Comcast Program Access Challenge

A three-judge panel of the
D.C. Circuit Friday denied Cablevision's challenge to the program access rules,
according to a copy of the opinion.

The court decided that the
FCC was reasonable to conclude that the rules were still necessary, but that at
the current pace of change in the marketplace, they probably won't be the next
time the FCC reviews them.

The court essentially
concluded that, while the multichannel video marketplace had gotten more
competitive, it was not sufficiently so to render arbitrary and capricious the
FCC's decision to renew the program access rules for another five years back in

"Like the must carry and retransmission consent regime that allowed ABC to black out the Oscars for 3 million New York households this week, the program access rules are based on an outdated and obsolete view of the competitive landscape," said Cablevision in a statement. "In today's highly competitive video marketplace these rules do nothing but tilt the playing field in favor of phone companies and broadcasters to the detriment of fair competition and consumers."

The ruling means Comcast
won't have to volunteer to abide by program access rules as a condition of its proposed
joint Venture with NBCU, as it had offered as recently as Thursday (March 11)
in a Hill hearing to do even if they were thrown out by the courts.

The access rules prevent
cable operators from striking exclusive deals for satellite-delivered
programming in which the operator has a financial interest. The rules have not
applied to terrestrially-delivered programming, but the FCC last fall took
action to close that exemption.

"The amount and
diversity of programming has expanded rapidly, giving MVPDs more programming
options even if one network were unavailable to them because of an exclusive
contract," wrote Chief Judge David Sentelle for the majority.
"However, the four largest cable operators are still vertically integrated
with six of the top 20 national networks, some of the most popular premium
networks, and almost half of all regional sports networks. The Commission
believes the ability and incentive for vertically integrated cable companies to
withhold "must-have" programming remains substantial enough to require the
further extension of the exclusivity prohibition. We must defer to the
Commission's analysis."

The court had some problems
with how the FCC decided there was still a threat of withholding
programming, despite the cable industry's argument that a competitive
marketplace was a sufficient governor on that threat.

"The Commission's
calculations on the likelihood of future [program] withholding appear
susceptible to questions about their predictive power. What is true about
Comcast SportsNet Philadelphia may not be equally true for all regional
networks and even less true for national networks, yet the Commission still
used that one station as the basis for much of its analysis." But the
court was not ready to get into the "murky science" of predictive
judgments itself and conceded that "the Commission naturally has no
access to infallible data about the nature of contracts that do not exist. "We
do not sit as a panel of referees on a professional economic journal, but as a
panel of generalist judges obliged to defer to a reasonable judgment by an
agency acting pursuant to congressionally delegated authority. The Commission
has recognized and analyzed complicated pictures of the MVPD market both
current and projected. These data qualify as substantial evidence for arbitrary
and capricious review."

But while the FCC may have
made a justifiable call this time, the court concluded, next time could be
another matter. "We anticipate that cable's dominance in the MVPD market will
have diminished still more by the time the Commission next reviews the
prohibition and expect that at that time the Commission will weigh heavily
Congress's intention that the exclusive contract prohibition will eventually
sunset. Petitioners are correct in pointing out that the MVPD market has
changed drastically since 1992. We expect that if the market continues to
evolve at such a rapid pace, the Commission will soon be able to conclude that
the exclusivity prohibition is no longer necessary to preserve and protect
competition and diversity in the distribution of video programming."

Cablevision and the FCC had
squared off in the court in oral argument back in September over the FCC's
five-year extension of the program
access rules back in 2007
, with both sides getting some tough questions.

At the time, Chief Judge
Sentelle suggested Cablevision had a high hurdle in asking it to overturn the
predictive judgments of the FCC in not sunsetting the program access rules,
suggesting it had been years since the court did something similar.
"The Commission's program access rules have played a
vital role in making diverse and attractive video programming available to cable
and satellite TV viewers," said FCC Chairman Julius Genachowski in response to
the ruling. "I'm pleased that the D.C. Circuit court has confirmed the
Commission's authority to prevent vertically integrated cable companies from
denying critical television programming to their competitors and

The decision was 2-1, with Judge Thomas Griffith concurring and Judge Brett Kavanaugh strongly dissenting, saying he thought the exclusivity rules were discriminatory and clearly violated the First Amendment.

Kavanaugh points to the fact that the second and third-largest MVPDs, DISH and DirecTV are not subject to the exclusivity ban, while Cablevision, the seventh largest, is. "What justification is there for such discrimination against a less powerful entity? None - or at least none that the FCC has provided," he wrote, adding "It bears mention, moreover, that this discrimination against certain video programming distributors was not a considered legislative decision; it is simply an unintended relic of the far different video programming distributor market that existed in 1992 when Congress passed the Cable Act."

"We're disappointed that the court has preserved the current unfairness that allows DirecTV to have exclusives for NFL Sunday Ticket and NASCAR Hot Pass while restricting the exclusives that cable operators may have," said Comcast in a statement. "But it is welcome that the court - majority and minority alike - recognize that the marketplace of today is vastly more competitive than in 1992 and that rules and regulations must keep pace with marketplace changes. And we said as recently as yesterday, whatever the court decided on these rules, we remain prepared to discuss with the FCC having them continue to apply to Comcast as part of the NBCU transaction if appropriate."

Cablevision has not ruled out appealing the decision to the full court. Asked it it would appeal, a company spokesman said the cable operator is "considering its options."