Disney fights bundle breakups

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Disney and other major programmers are attempting to blunt a government effort that would prevent them from bundling channels in sales to cable and satellite operators.

In papers filed Friday, Disney told the FCC that it is barred from writing a rule that would void the so-called "tying arrangements" because that is outside the commission's jurisdiction.

"The FCC cannot prohibit packaged offerings because it has no legal authority to do so," Disney said. "In order to adopt a regulation, an agency must have express statutory authority from Congress or properly exercise its ancillary jurisdiction. In this case, no part of the (law) authorizes the FCC to interfere with the substance of carriage negotiations."

While the proposal effects Disney, Viacom, NBC Universal and News Corp., Disney, with its ESPN family of networks and the Disney Channel, has become a leader in the fight over carriage deals.

Disney also contends that the regulation is unnecessary because the company doesn't "tie" its networks together.

"Disney does not require carriage of its two most popular cable channels: ESPN and Disney Channel," Disney Media Networks global distribution president Benjamin Pyne said in a sworn statement.

Pyne did tell the commission that it does not offer ESPN News and ESPN2 to operators without taking the flagship ESPN because the services were never intended to be sold alone.

FCC chairman Kevin Martin launched the commission on this path last year in response to rampant rate increases by cable operators. Operators say an increase in the cost of programming has forced them to charge subscribers more.

"Broadcast and cable programmers routinely tie marquee programming, such as premium channels or regional sports programming, with unwanted or less desirable programming," Martin said in October when the FCC voted to pursue the issue. "I take cable operators at their word when they point to the increased cost of programming as the reason for the increased cost borne by consumers."

On Friday, the National Cable and Telecommunications Assn. also attempted to wave off the commission, arguing that the video marketplace is competitive from top to bottom and there is no need for new regulation.

"To the contrary," the NCTA wrote, "it is time for a less regulatory, more market-driven approach that promotes regulatory parity and respects the limits of the commission's authority."

However, small cable operators back Martin, saying that tying arrangements are a fact of life that forces them to raise prices and offer programming their customers don't want.

"The right to distribute 13 of the most powerful channels are tied to or bundled with obligations to distribute at least 60 other channels," wrote the American Cable Assn., the trade group for small operators. "These tying and bundling practices have resulted in the increasingly bloated, increasingly costly, increasingly standardized expanded basic tier."

Martin has the cable industry under a microscope. He's also pushing cable operators to offer channels on an a la carte basis as a way to limit racy programming.

Disney is against the a la carte plan. "All cable content is unique speech that may not be regulated as a commodity, free from constitutional concern," the company wrote. "There simply is no support for application of a rational-basis standard to a la carte regulation of cable programming."

It is unclear when the commission will make a final decision on the rules. FCC officials declined comment as the filings were being made.
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