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FCC Votes To Close Local Sports Loophole

1/20/2010 02:09:24 PM Eastern

Washington
- The Federal Communications Commission
(FCC) voted 4-1 Wednesday to stop cable operators from withholding local sports
channels from rival satellite and telephony-based multichannel TV service
providers.


The decision closed what the industry called a "terrestrial loophole"
large cable operators, including Comcast and Cablevision, have used to control
the distribution of certain local sports events through exclusive arrangements
with the outright ownership of certain teams.


By law, cable operators are required to offer access to channels they partially
or wholly own to multichannel TV rivals at reasonable rates. But the law
contained the so-called terrestrial loophole that enabled cable companies to
deny access to that programming if the channel's video feed is not carried via
a satellite link at some point in relaying that programming to the home.


Companies including DirecTV and Verizon (FIOS) have argued that the loophole
has imposed a significant competitive disadvantage, since local sporting events
are a key draw to pay TV services.


Verizon filed a complaint in July against Cablevision for withholding HD
coverage of New York Knicks and Rangers games. Cablevision's controlling
partners have ownership interests in Madison
Square Garden
as well as the Knicks and Ranger teams.


Comcast controls rights to certain sports teams in Philadelphia, where it has kept its SportsNet
channel from the DirecTV and Dish Network satellite services.


AT&T filed a similar complaint last year against Cox Communications for
withholding rights to San Diego Padres game coverage.


In voting to approve the measure, FCC chairman Julius Genachowski said, "The
bottom line is that viewers should not be unfairly forced to choose between the
sports teams they love and the provider they prefer. Our new rules allow
competitors to seek recourse when they have been unreasonably denied access to
terrestrially delivered programming."


But Robert McDowell, who was the lone commissioner to vote against the
proposal, said he felt the decision was "beyond our statutory reach"
under current law, and predicted a legal challenge to the decision coming from
the cable industry.


In a statement on the ruling, DirecTV said: "The FCC's order today
eliminating the terrestrial loophole is a big win for consumers and fair
competition in the marketplace. We vigorously applaud the FCC for recognizing
that withholding cable-owned regional sports networks from non-cable
competitors significantly hinders competition and is anti-consumer. We are
looking forward to offering DirecTV customers the local sports programming they
have been denied for so many years."


Similarly, Dish Network stated: "Dish Network congratulates the FCC for
delivering consumers a double victory: First, sports fans in Philadelphia and
San Diego will soon have a choice of pay-TV providers; second, consumers can no
longer be held hostage during a contract dispute between cable programmers and
video distributors. DISH Network thanks Chairman Genachowski for his leadership
and for standing up for consumers and competition."

Kathleen Grillo, Verizon federal regulatory affairs senior
VP, said: "This is a big-time victory for television sports fans. The
FCC's decision to make must-see regional sports programming, including
high-definition feeds, presumptively available to competitors, puts viewers in
the driver's seat. This ruling means that consumers will no longer have to
stick with their incumbent cable provider in order to watch local teams in high
definition."

In a statement on the ruling, Cablevision said: "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. 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. We are also pleased that despite the phone
companies' overwhelming lobbying effort, the FCC has ensured a complaint
process. If the phone companies complain that they are unable to compete, we
are confident that we can prove that it is for a variety of reasons, none of
which have to do with HD sports programming. Verizon and AT&T do not need a
regulatory bailout in order to compete."

Representatives of the National Cable and Telecommunications
Association (NCTA) and Comcast did not return requests for comment as this was
posted.