May 28, 2013 8:52am PT by Eriq Gardner
Comcast Beats FCC at Appeals Court in Carriage Discrimination Dispute
The U.S. Court of Appeals for the D.C. Circuit has handed Comcast a big victory in a dispute over whether the company discriminated against the Tennis Channel.
In 2011, the Federal Communications Commission determined that Comcast had discriminated against the independent network by limiting it to a premium sports tier instead of a more broadly distributed basic tier enjoyed by Comcast-owned sports networks, Golf Channel and Versus. A FCC administrative law judge originally ordered Comcast to pay $375,000 to the government and stop discriminating against the network "vis-a-vis its similarly situated affiliates."
On Tuesday, the federal appeals court reversed the ruling, finding that the FCC had "failed to identify adequate evidence of unlawful discrimination."
When the case was argued in February, many legal observers wondered whether the appeals court was on the precipices of a major decision that would limit the FCC's ability to promote competition and diversity in cable programming.
Among the arguments that Comcast made was that the FCC's determination of discrimination against the Tennis Channel represented a violation of the First Amendment in that the FCC order "dictates the content of protected speech and rewrites a private contract."
In its ruling on Tuesday, the appeals court said it didn't need to reach the First Amendment issue because of the absence of proof to support discrimination in the first place.
The majority ruling authored by Judge Stephen Williams says that the FCC might have pointed to the number of subscribers who would switch to Comcast if it carried Tennis more broadly, or the number who would leave Comcast in the absence of broader carriage.
But he says the agency didn't offer that.
"Without showing any benefit for Comcast from incurring the additional fees for assigning Tennis a more advantageous tier, the Commission has not provided evidence that Comcast discriminated against Tennis on the basis of affiliation," says the ruling. "And while the Commission describes at length the 'substantial evidence' that supports a finding that the discrimination is based on affiliation, none of that evidence establishes benefits that Comcast would receive if it distributed Tennis more broadly. On this issue the Commission has pointed to no evidence, and therefore obviously not to substantial evidence."
The ruling also brought two concurring opinions.
Judge Brett Kavanaugh wanted to go much further. He wishes to severely limit antitrust allegations of discrimination in the video programming distribution market with a finding that Comcast does not have "market power" in that market. He writes that the FCC mistakenly focuses on the effects of Comcast’s conduct on Tennis Channel rather than on overall competition. And the judge adds that applying Section 616 of the Communications Act -- the part that bans a company from making an "unreasonable restrain" on a competitor -- "to a video programming distributor that lacks market power would violate the First Amendment."
Judge Harry Edwards, meanwhile, wants to overrule the FCC for the simple reason that the Tennis Channel didn't file a timely objection until 2010, five years after it agreed to a sports tier in a 2005 contract. As such, the judge says it should have been ruled outside the statute of limitations.
Comcast was represented by attorney Miguel Estrada. The National Cable & Telecommunications Association supported Comcast in an amicus brief. The FCC was represented by deputy general counsel Peter Karanijia. Supporting the respondent in an amicus was Bloomberg L.P., which has waged its own war for years against Comcast over allegedly discriminatory treatment on its business channel.
In a statement, the Tennis Channel expressed disappointment about today's ruling and hopes the FCC will further review Comcast acts. It says, "Based on the merits of this particular case, we believe that it is the obligation of the FCC to act in the public interest to ensure a diverse marketplace of voices, as mandated by Congress when it introduced the Cable Act."
Comcast says it was pleased with the ruling. It says, "Comcast’s decision to carry Tennis Channel was the product of legitimate business considerations, not affiliation."
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