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FCC's Authority to Regulate Cable TV Competition Under Attack

At an appellate hearing, several judges appear highly critical of a ruling last year that punished Comcast for discriminating against the Tennis Channel.

The U.S. Court of Appeals for the D.C. Circuit could be on the verge of a big decision that limits the ability of the Federal Communications Commission to make decisions that promote competition and diversity in cable programming.

On Monday, the circuit judges reviewed an FCC decision that held that Comcast discriminated against the Tennis Channel by limiting the independent network to a premium sports tier instead of a more broadly distributed basic tier enjoyed by Comcast-owned sports networks, Golf Channel and Versus (which is now known as the NBC Sports Network). The FCC decision was cheered by Bloomberg LLC, a business channel that has similarly been at odds with Comcast over the media conglomerate's alleged favoring of CNBC.

But by most accounts of the Monday hearing, the D.C. Circuit was highly critical of the FCC's decision and appears ready to reverse it.

The FCC's decision, which became final last summer, came in the wake of Comcast's acquisition of NBCUniversal. Applying authority vested under the Cable Television Consumer Protection and Competition Act of 1992, the FCC took the unprecedented step of ordering Comcast to pay a forfeiture of $375,000 and carry the Tennis Channel at the same level of distribution as Golf Channel and Versus.

Comcast appealed the ruling, arguing among other things that it represented a violation of the First Amendment in that the FCC order "dictates the content of protected speech and rewrites a private contract...[I]t nullifies statutory requirements in order to insulate government-chosen speakers from competition."

On Monday, Comcast found sympathy from the judges on this argument.

Judge Brett Kavanaugh said the FCC "has a serious problem with the First Amendment," according to a report from Legal Times, The judge also expressed concern about ordering companies to "carry the speech they don't like."

Miguel Estrada, the attorney for Comcast, encouraged the other judges to see this viewpoint, comparing it to The New York Times being ordered to give the front page to a freelance reporter. He also blasted the FCC's decision as being "one of the most outrageous invasions of the First Amendment since the Sedition Act," the early 20th Century law that forbade abusive language directed towards the U.S. government.

In court papers, the FCC defended itself.

Tennis Channel’s ability to “compete fairly” was restrained in an unreasonable manner, the FCC's lawyers wrote. As for the First Amendment, the FCC argued that "the agency’s purpose -- to ensure that Comcast does not leverage its position in a way that unreasonably restrains Tennis Channel’s ability to compete -- is unrelated to the content of expression."

Comcast also attacked the FCC's decision on other grounds including that the agency had ignored market considerations such as whether it really had financial interest to discriminate. The media giant also wanted the agency to investigate how other cable and satellite distributors were treating the Tennis Channel.

If the appeals court reverses the FCC's decision and remands it for more reconsideration, it could be with broad direction that curtails the agency's broad authority to regulate competition. The appeals court also could strike the ruling on more technical grounds such as the fact that the Tennis Channel didn't file an objection until several years after it agreed to a sports tier in a 2005 contract and arguably past the statute of limitations.

Email: eriq.gardner@thr.com; Twitter: @eriqgardner