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Cable Ops Diverge Over Diversity

It’s large versus small as MVPDs pitch new commission on contracts, bundling 2/06/2017 8:00 AM Eastern
TakeAway

What the FCC does, or doesn’t do, about programming contracts could affect the carriage balance of power. x

WASHINGTON — Comcast-NBCUniversal, the nation’s largest cable operator and a major network owner, has asked the Federal Communications Commission to scrap proposed changes to programming contracts as unnecessary in a vibrantly competitive marketplace.

 

But smaller cable operators represented by the American Cable Association are in the opposite corner, arguing that such changes are necessary and that doing something about bundled carriage deals would be even more important.

 

CONTRACT TERMS DEBATED

 

A politically divided FCC back in September voted to propose prohibiting unconditional “most favored nation” (MFN) provisions and “unreasonable” alternative delivery method (ADM) clauses in contracts. Independent programmers and smaller distributors have said those provisions — which can put limits on what networks charge and how much programming they make available outside of the universe of pay TV providers — hinder access to diverse programming.

 

In comments filed on that FCC notice of proposed rulemaking, adopted under a majority Democratic commission over Republicans’ dissent, Comcast is telling the commission (now run by a Republican majority) that the answer to whether the FCC can and should impose such restrictions is a resounding “no.”

 

Comcast said the FCC should recognize that the marketplace is “competitive and diverse” at all levels, decline to adopt the proposed rules and terminate the proceeding.

 

The FCC’s NPRM followed an inquiry into program diversity prompted by Democratic commissioner Mignon Clyburn, who had called for a notice of inquiry on barriers to diverse programming at the time of the FCC’s approval of the AT&T-DirecTV deal.

 

In its filing, Comcast dismissed the NOI as having resulted in the “usual mixture of grievances and unsupported assertions,” while at the same time producing “overwhelming” evidence that the video marketplace is “vibrant and competitive.”

 

“Programming of every genre, niche, source, and viewpoint continues to increase by leaps and bounds, new online platforms are launching one after another (some that look a lot like traditional distributors or networks, and others that appear to be new things altogether), and consumers are enjoying the bounty of a video programming marketplace more robust, dynamic, and diverse than it has ever been.”

 

Even if the FCC wanted to impose the unnecessary restrictions on contracts, it couldn’t, Comcast has argued. That’s because, in the MSO’s view, the program-carriage rules are not a general grant of authority, but are instead limited to the specific conduct identified by Congress. The FCC has suggested it can restrict the contracts under the specific nondiscrimination provision, but Comcast disagrees on to that point as well.

 

Illustrating the divide on the issue between the larger and smaller MVPDs, the American Cable Association had plenty of grievances.

 

It told the FCC that while the MFN and ADM clauses are bad enough, a bigger problem is that smaller distributors often don’t even get to strike deals under any terms with diverse programmers, because their time, money and bandwidth is tied up in programming bundles forced upon them by programmers with must-have channels.

 

“It is bundling that represents by far the greatest threat to the viability of independent programming, and therefore it is bundling that must be the focus of the commission’s efforts,” the ACA said.

 

IN DEFENSE OF MFN

 

As for MFNs and ADMs, the ACA said the FCC went too far in proposing the elimination of all unconditional MFN arrangements between distributors and independent programmers. Rather, the agency should only apply the ban to large MVPDs, rather than the smaller ones ACA represents, asthere is no evidence that smaller distributors even have the muscle to insist on such contracts, per the trade group.

 

The ACA got some backup from Public Knowledge, which argued the FCC should take a case-by-case look at the contracts and step in where they are anticompetitive.

 

And though the ACA argued that the FCC should look at bundling by broadcasters in retransmission-consent contracts, broadcasters said no way.

 

“Bundling helps broadcasters achieve economies of scale and cost savings and also promotes the amount, quality and diversity of programming available to consumers,” the National Association of Broadcasters told the FCC. “Thus, bundling aligns with this proceeding’s goal to ‘foster greater consumer choice and enhance diversity.”

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