Massillon Cable-FSN Ohio Dispute Heads to Arbitration

Ohio Cable Operator Wins Ruling Based on Conditions on News Corp.’s Acquisition of DirecTV

By Linda Moss -- Multichannel News, 5/3/2007 11:14:00 PM

In a preliminary victory for small cable operators, an arbitrator ruled that a contract dispute between Massillon Cable TV and FSN Ohio should proceed to arbitration under conditions set on News Corp. as part of its DirecTV acquisition.

The arbitrator issued an interim order finding in favor of Massillon, which maintained that its dispute with the Fox Cable-owned regional sports network was “arbitrable” under special conditions set on News Corp. in 2003 by the Federal Communications Commission as part of the DirecTV deal. Those conditions -- the so-called Fox-Hughes order -- gave distributors the option of submitting carriage disputes regarding News Corp.-owned RSNs to arbitration.

“Fox has argued that the scope of the Fox-Hughes order is very, very limited,” said Mark Palchick, Massillon’s lawyer. “This says no: Where there is a dispute over price terms and conditions between a cable operator and a regional sports network, you have this remedy, because Fox as a matter of law has undue market power.”

Massillon and FSN Ohio have been directed to prepare their cases for an arbitration hearing on the merits.

Earlier this week, lawyers for News Corp. met with the Federal Communications Commission’s Media Bureau to discuss the arbitrator’s interim order. On Wednesday, News Corp. sent a letter to the FCC saying that FSN Ohio will seek an immediate review of the arbitrator’s decision, looking to overturn it.

Massillon -- which has more than 45,000 subscribers in Ohio -- last October demanded arbitration against FSN Ohio of an ongoing contract dispute they’d failed to resolve despite negotiations.

The sports channel one year ago lost carriage of Cleveland Indians Major League Baseball games to a new channel, SportsTime Ohio. As a result, Massillon wanted FSN Ohio “to adjust” its license fee. Massillon claimed that it was trying to secure reasonable rates and to keep its services affordable.

News Corp.’s Fox Cable moved to dismiss the arbitration, claiming that a midterm contract dispute was not subject to arbitration. FSN Ohio paid heavily to extend a TV-rights deal with the National Basketball Association’s Cleveland Cavaliers after it lost the Indians baseball games.

But the arbitrator, selected by the two parties from a special American Arbitration Association (http://www.adr.org) panel, rejected FSN Ohio’s argument, which was that the arbitration provisions of the FCC’s conditions only applied in two limited situations: following the expiration of an existing contract or after a first-time request for such carriage.

“I am pleased that the arbitrator recognized that cable operators have the right to arbitrate disputes over the terms and conditions of a Fox RSN (or regional sports network) agreement that arises out of Fox's market power,” Massillon president Robert Gessner said in a prepared statement Thursday.

“Fox’s attempt to limit the effectiveness of the Fox-Hughes order was clearly not consistent with the intent of the FCC’s decision,” he added. “Now that we are past this initial delay, I look forward to the final decision of the arbitrator.”

According to Palchick, under the FCC’s conditions, Fox Cable is only allowed to appeal a final decision by the arbitrator to that regulatory body, not an interim finding.

In its letter to the FCC, News Corp. charged, “While Massillon could pursue traditional remedies under its binding contract with FSN Ohio, its demand for arbitration was an abuse of a procedure established by the commission for use only at the initiation or expiration of an RSN carriage contract.”