Tennis Channel ekes out FCC win over Comcast on carriage rules

WASHINGTON Wed Jul 25, 2012 4:14pm EDT

Julius Genachowski, Chairman of the Federal Communications Commission, addresses attendees during the International CTIA WIRELESS Conference & Exposition in New Orleans, Louisiana May 8, 2012. REUTERS/Sean Gardner

Julius Genachowski, Chairman of the Federal Communications Commission, addresses attendees during the International CTIA WIRELESS Conference & Exposition in New Orleans, Louisiana May 8, 2012.

Credit: Reuters/Sean Gardner

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WASHINGTON (Reuters) - The Federal Communications Commission upheld an administrative law judge's ruling that Comcast Corp discriminated against the Tennis Channel when it placed the network in a more expensive viewing tier than Comcast's affiliated sports networks.

The agency voted 3-2 along party lines last week to require Comcast to move the independent Tennis Channel within 45 days to a tier in line with and reaching the same number of subscribers as the tier carrying Comcast's Golf Channel and NBC Sports Network.

The ruling is the first time a cable network has prevailed over a cable operator under the FCC's 1993 federal anti-discrimination program carriage rules.

FCC Chairman Julius Genachowski and his fellow Democrats on the panel, Mignon Clyburn and Jessica Rosenworcel, concluded in an order released late Tuesday that discrimination in favor of Comcast's affiliated networks "unreasonably restrained Tennis Channel's ability to compete."

Comcast was also ordered to pay a $375,000 fine.

"This decision could not have come at a better time for Comcast customers across this country, as we approach Tennis Channel's coverage of the U.S. Open beginning August 27," the network said in a statement.

Comcast could have had to add the network to an additional 18 million households, incurring millions of dollars more in programming costs that it will owe the Tennis Channel - an expense likely to trickle down to Comcast subscribers.

Comcast, the largest U.S. cable company and the top broadband provider, said it will appeal the decision to the courts and examine options for requesting a stay of the decision from going into effect.

The Tennis Channel filed a complaint with the FCC in 2010, alleging discriminatory treatment. It sought wider distribution on par with other networks, which would attract more advertising revenue and increase fees calculated on a per-subscriber basis that Comcast paid to air its content.

Comcast contended that its 2005 contract with the network stipulated placement in a more expensive sports tier sought by fewer subscribers, and said a move would impose higher costs on its basic cable subscribers.

An FCC administrative law judge ruled last December in favor of the Tennis Channel's argument that it was losing out on revenue by not being included in Comcast's basic programming package, in contrast to sports networks owned by Comcast.

Comcast was granted an interim stay from the FCC, which required the full commission to vote on the matter and allowed Comcast to leave the channel where it was until that vote.

"The decision will accomplish nothing other than to drive up programming costs and enrich a group of wealthy investors in the Tennis Channel," said Comcast/NBCUniversal Washington President Kyle McSlarrow in a statement.

Comcast acquired a 51 percent stake in NBC Universal from General Electric Co last year.

McSlarrow argued the decision misapplies statutory standards for discrimination and competitive harm, ignores evidence from unbiased cost-benefit analyses and violates Comcast's First Amendment rights.

FCC Republican Commissioners Robert McDowell and Ajit Pai agreed with the cable operator's assessment that the Tennis Channel's placement was not discriminatorily motivated by ownership interests.

McDowell and Pai noted in their dissent that no major pay TV provider in 2010 when the complaint was filed found the Tennis Channel to warrant similar distribution to the Golf Channel and NBC Sports Network, previously called Versus.

The ruling, they said, will lead to cable and satellite operators carrying more "networks they do not want, on tiers with broader penetration, and at higher prices than ever before" to stave off discrimination complaints.

(Editing by Leslie Adler)

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