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Will FCC Comcast-NBCU Order fix RSN and other dispute arbitration

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#1 OFFLINE   phrelin


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Posted 22 January 2011 - 12:43 PM

Historically Comcast has been intransigent about providing RSN's to both satellite providers and competing cable systems. On the surface, it appears that the FCC took steps to correct this problem. But Oregonian writer Mike Rogoway in an article updated on Wednesday was told "no change" by Comcast and DirecTV, though Charlie (Dish) is still looking:

When the Federal Communications Commission gave its thumbs-up Tuesday to Comcast's purchase of NBC Universal, it attached conditions aimed at preventing the cable company from blocking rivals' access to Comcast's and NBC's programming.

The provisions include a requirement that Comcast offer its sports networks to competitors, and abide by an arbitrator's ruling if the parties can't come to agreement.

But the ruling apparently won't break an impasse that has kept Portland Trail Blazers games off satellite TV and some competing cable systems.

"We were already living under an arbitration environment that either one of the parties could have invoked," a Comcast spokeswoman said Wednesday.

I'm hoping the litigious Charlie (and maybe someday DirecTV) will not agree with this interpretation relative to Comcast's RSN's. I think there is sufficient legal justification to throw out all previous arbitration rules and rulings and start over. Please note that I'm adding emphasis in the quotes from the FCC Order where I think it's important. Specifically, the FCC's Order includes:


1. For purposes of these Conditions, the AAA Rules are modified in several respects as they apply to the arbitration remedy set forth above.

2. Initiation of Arbitration. Arbitration shall be initiated as provided in Rule R-4 except that, under Rule R-4(a)(ii), the party initiating arbitration shall not be required to submit copies of the arbitration provisions of the contract, but shall instead refer to this Order in the demand for arbitration. Such reference shall be sufficient for the AAA to take jurisdiction.

If Dish, for instance, would request arbitration under the new rules, Charlie could ask the arbitrator to take notice of the FCC's findings which include the following:

The proposed transaction creates the possibility that Comcast-NBCU, either temporarily or permanently, will block Comcast’s video distribution rivals from access to the video programming content the JV would come to control or raise programming costs to its video distribution rivals. These exclusionary strategies could raise distribution competitors’ costs or diminish the quality of the content available to them. As a result, Comcast could obtain or (to the extent it may already possess it) maintain market power in video distribution,62 and charge higher prices to its video distribution subscribers than those consumers would have paid absent the transaction. To address this potential harm, we impose an arbitration remedy, with a number of procedural improvements from arbitration remedies in previous transactions, that applies to all Comcast-NBCU programming. (Pp. 13-14)

Congress and the Commission have long been concerned about the possibility that an integrated video firm may exploit its ability to exclude its distribution rivals from access to its programming, or raise programming prices to harm competition in video distribution. The Commission’s program access rules were promulgated in response to congressional concerns expressed in the 1992 Cable Act. Specifically, the Congress was concerned that vertically integrated program suppliers have the ability and incentive to favor their affiliated cable operators, allowing them to impair competition from existing competitors, new entrants, and new technologies (such as DBS). This power, in turn, could result in higher prices and more limited consumer choice. In 2007, the Commission extended the prohibition in its program access rules against exclusive contracts for any vertically integrated programming, finding that competing MVPDs need access to vertically integrated programming to remain viable substitutes to the incumbent cable operator in the eyes of consumers. (pages15-16)

As explained more fully in the Technical Appendix, the record evidence supports a finding that without Comcast-NBCU’s suite of RSN, local and regional broadcast and national cable programming, other MVPDs likely would lose significant numbers of subscribers to Comcast, substantially harming those MVPDs that compete with Comcast in video distribution. This conclusion is consistent with our previous finding that Comcast’s withholding of the terrestrially delivered Comcast SportsNet Philadelphia RSN from DBS operators caused the percentage of television households subscribing to DBS in Philadelphia to be 40 percent lower than what it otherwise would have been. In addition, we find that Comcast-NBCU will negotiate more aggressively relative to the pre-transaction NBCU when selling NBCU content to Comcast’s video distribution rivals. Unlike the pre-transaction NBCU, the integrated firm will take into account the possibility that any harm from failure or delay in reaching agreement would be offset to some extent by a benefit to Comcast, as reaching a higher price would raise the costs of Comcast’s rivals. As a result, the transaction will improve Comcast-NBCU’s bargaining position, leading to an increase in programming costs for Comcast’s video distribution rivals. (pp17-18)

We also find that Comcast-NBCU will have the power to implement an exclusionary strategy, notwithstanding that the programming would be owned by a joint venture between Comcast and GE. We evaluate this transaction as if Comcast will obtain all the profits generated by any exclusionary strategy by Comcast-NBCU because Comcast is acquiring the right to acquire sole ownership from GE and may exercise that right without further Commission approval. Moreover, we conclude that Comcast-NBCU’s fiduciary duty to GE does not preclude exclusionary strategies that benefit Comcast-NBCU. For example, Comcast-NBCU could raise the price of programming to Comcast at the same time it raises prices to Comcast’s rivals, thereby shifting to Comcast-NBCU some of the profits that Comcast earns by exercising market power in video distribution. As in past transaction review proceedings, therefore, we find that duties imposed by corporate and securities laws do not adequately protect the public interest in this transaction. (P18)

To address this concern in prior transactions, the Commission has imposed baseball-style arbitration to maintain the pre-integration balance of bargaining power between vertically integrated programming networks and rival MVPDs. We do so here, with modifications. We establish in Appendix A a mechanism whereby an aggrieved MVPD may choose to submit a dispute with Comcast-NBCU over the terms and conditions of carriage of Comcast-NBCU affiliated programming to commercial arbitration. As in prior transactions, the arbitrator is directed to pick between the final contract offers submitted by Comcast-NBCU and the complainant MVPD based on which offer best reflects the fair market value of the programming at issue. This neutral dispute resolution forum will prevent Comcast-NBCU from exercising its increased market power to force Comcast’s MVPD rivals to accept either inordinate fee increases for access to affiliated programming or other unwanted programming concessions, and will effectively address price increase strategies that could otherwise be used to circumvent our program access rules. (Page 22)

Other commenters express concerns about Comcast-NBCU’s bundling of video programming in negotiating carriage with MVPDs. While potentially providing efficiencies such as lower prices, bundling may also harm competition, for example by facilitating anticompetitive exclusion. We are particularly concerned about the anticompetitive possibilities arising from bundling of marquee programming. According to our analysis, Comcast-NBCU’s marquee programming includes at least its broadcast programming, its RSN programming, and its broad portfolio of national cable programming. Therefore, we permit MVPDs, in demanding a final offer from Comcast-NBCU, to demand a standalone offer for (1) broadcast programming, (2) RSN programming, (3) the bundle of all cable programming and/or (4) any bundle that a Comcast-NBCU programmer has made available to a similar MVPD. The standalone offer requirement we adopt here, as in prior proceedings, will help to mitigate the potentially anticompetitive effects of bundling post-transaction by allowing MVPDs to unbundle those categories of marquee programming we have identified. This requirement also mitigates unreasonable bundling without preventing Comcast-NBCU from obtaining efficiencies in program packaging. (Page 25)

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#2 OFFLINE   James Long

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Posted 22 January 2011 - 12:50 PM

It is one of those things I'll believe when I see. Wake me when CSN Philly is on DISH or DirecTV.

#3 OFFLINE   harsh


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Posted 22 January 2011 - 01:03 PM

Why do you expect DISH Network to take the first step on behalf of everyone else?

I would expect that to come from the provider that built their house on comprehensive sports offerings.

The conditions attached have been meaningless as they've obviously borne no fruit. I believe that the vested parties all suffer in arbitration but the viewers (and ultimately the Blazers and Ducks) may win.
Too often we enjoy the comfort of opinion without the discomfort of thought. -- JFK

#4 OFFLINE   logray



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Posted 22 January 2011 - 01:56 PM

Well let's not vote for the viewers here, after all - who cares about what they want to watch ?!?!?! (obvious sarcasm ;))

Thanks for the thread, I was thinking about starting it up myself - and I wholeheartedly agree there needs to be movement in this area.

We sports fans want to watch our local teams.

Unfortunately the viewership seems to just move to whatever provider is not having contract disputes instead of storming the castle. :nono2:

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