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FCC Votes To Close Cable’s Local Sports Loophole

The Federal Communications Commission (FCC) voted 4-1 last week 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, the Knicks and the Rangers.

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: “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.”

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.”

Kathleen Grillo, Verizon federal regulatory affairs senior VP, said: “This is a big-time victory for television sports fans. 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.