News

FCC Gets Another Crack at Over-the-Top Decision

MEDIA BUREAU: OVDs DON’T NEED TO SHARE CONTRACT TERMS WITH COMCAST 3/17/2013 8:00 PM Eastern

WASHINGTON — A new decision by the Federal Communications Commission’s Media Bureau likely was celebrated by the National Academy of Arbitrators, but not by the nation’s largest cable operator.

The bureau stayed its own decision from only a little over three months ago, deciding that — at least for now, and perhaps for good — over-the-top video distributors seeking access to programming from Comcast’s NBCUniversal subsidiary do not have to make the terms of their agreements with other programmers available to the cable operator’s outside counsel or experts.

The ruling means that Comcast will have to take the word of such OVDs as Netflix as to whether contract terms or comparable, or submit all negotiations to an outside arbiter.

DECEMBER REMEMBERED

Last December, the bureau said “OVDs that invoke the benchmark condition must disclose the terms of comparable peer programming agreements to the extent necessary to enable Comcast/NBCU to carry out its obligations under the condition.”

Comcast had asked for clarification stating that, in order to comply with a request to provide terms similar to other OVDs, Comcast would have to know what the other terms were.

Comcast had asked that the information be made available to its employees. The bureau instead decided in the December order that the information should only go to an outside entity employed by the cable provider.

Not wanting to make such terms available to a competitor’s hired experts, CBS, News Corp., Viacom, Sony Pictures Television, Time Warner Inc. and The Walt Disney Co. had filed a stay request on Dec. 18. Advocacy group Public Knowledge also requested a stay, and challenged the underlying condition.

Comcast argued it was “self-evident” that it could not meet the comparable terms and conditions benchmark unless it knew what the comparable terms were.

Comcast also said that none of the OVDs negotiating with Comcast for carriage of individual channels had made such information available.

Now, they won’t have to.

The benchmark condition requires that Comcast/ NBCU make its content available to OVDs on similar terms and conditions to deals those OVDs have struck with other content providers.

The bureau actually granted last week’s stay on its own motion, “to allow the commission an opportunity to address those issues” that the content companies had raised.

The commission can now decide whether or not making terms of other deals available was necessary to fulfill the benchmark condition — or whether or not the benchmark condition itself was in the public interest.

In a recent annual report to the commission, Comcast said it was in the midst of negotiating deals with OVDs for full-boat carriage of NBCU channels. But the benchmark clarification does not apply to those deals, because they do not have the “similar terms” condition, as do negotiations for individual channels.

“The full-freight condition doesn’t require similar terms, so we wouldn’t need to see the other deals to enter into negotiations,” a Comcast source said on a not-for- attribution basis. Comcast can negotiate full-freight deals before the OVD has negotiated with anyone else. OVDs can’t have more than 45% of their content be Comcast/NBCU channels, and can’t launch until lining up the 55% of content from someone else.

STRATEGIC STAY

The FCC did not elaborate on why the bureau had acted on its own motion and not granted the stay requested by the content companies.

A communications attorney who has been following the case said the FCC didn’t want to be perceived as taking sides. The bureau does not have to meet the four-pronged test that an outside party’s challenge would have to meet to warrant a stay.

The action also gives the bureau more time than if this were simply the next volley in a challenge process that began at the end of last year.

TAKEAWAY

In negotiating content deals with over-the-top providers, NBCUniversal won’t be able to consult contracts signed with its competitors.

March