FCC Votes To Close Terrestrial Exemption

Cable operators who do not share their owned terrestrially-delivered regional sports networks with their competitors will be presumed to be in violation of Federal Communications Commission rules against unfair acts or practices.

They get to rebut the presumption, but the FCC majority made clear Wednesday (Jan. 20) it was taking action against what it saw as a loophole for multichannel video providers to withhold must-have programming from competitors. As expected, the FCC voted to close, or at least narrow, the exemption of terrestrially-delivered networks from program access rules. The vote was 4-1, with FCC Commissioner Meredith Attwell Baker joining the Democratic majority and Republican Robert McDowell dissenting with the advice that he expected to see the decision challenged in court. Media Bureau staffer David Konczal said there were three reasons for the FCC's action. He said cable continues to have incentive and ability to engage in unfair practices; that there is evidence of withholding programming, including must-have cable-affiliated regional sports nets in San Diego, New York.; and Philadelphia; and that there is evidence that such withholding depresses satellite subscribership, and thus reduces competition.

The decision could mean the FCC may be looking for even greater concessions in Comcast's pending NBC Universal joint venture, according to influential Sanford Bernstein cable and satellite analyst Craig Moffett. The ruling could mean that once-exclusive operator-owned RSNs like the Comcast Sports Network in Philadelphia would have to be made available to satellite and telco competitors. In a research note Wednesday, Moffett wrote that the ruling could be a boon for DirecTV, which has half the penetration rate in Philadelphia (16%) than it has across the country, largely because it is unable to carry CSN. However, Moffett said that the overall subscriber impact on Comcast would be relatively small.

Satellite and telco operators seeking access to cable-owned sports programming were high-fiving over the FCC's vote to end the exemption of terrestrially delivered networks, particularly sports networks, from being made available to competitors. Gigi B. Sohn, president and co-founder of Public Knowledge, said, "The FCC should be commended for acting today to help consumers gain access to programming that has been denied to them by a quirk in communications law. The so-called 'terrestrial loophole' allowed cable operators to withhold programming from competitors, to the detriment of consumers and of competition."

Following the vote, Cablevision issued a statement defending program policies under the new rules. "While we find the legal basis for the decision unfounded, we are pleased that the FCC recognized the value of Cablevision's local programming strategy and investments," the statement said. "Verizon and AT&T will not receive an FCC bailout that will allow them to capture News 12, MSG Varsity and other programming that we have developed for our customers."