The American Cable Association is citing the Federal Communications Commission's rejection last week of an arbitration decision in favor of its member company Massillon Cable TV as evidence that the agency needs to think hard about how it crafts conditions in the Comcast/NBCU merger to make sure small cable operators don't come out on the short end of that deal.
The FCC on Nov. 18 reversed an arbitrator's award against Fox Sports Net Ohio, following a Massillon complaint pursuant to an arbitration condition in the commission's approval of the News Corp./Hughes merger. The FCC concluded that the arbitration condition applied to disputes over new contracts or renewals after expired contracts, but "does not permit the arbitration of disputes regarding the terms and conditions of ongoing carriage agreements."
Massillon invoked arbitration under the condition to renegotiate an existing contract, where it sought to pay lower license fees to FSN Ohio, after the RSN lost the rights to Major League Baseball's Cleveland Indians, which established its own sports network, SportsTime Ohio.
After the condition was imposed on News Corp., Massillon sought arbitration of an already-existing carriage dispute with FSN-Ohio, which ultimately protested the process and withdrew. The FCC concluded last week that the arbitrator lacked jurisdiction and the condition did not apply. It ordered to pay FSN Ohio any "excess affiliation fees," with interest, that it paid under the arbitrator's decision, and to pay its portion of the administrative fees of the arbitration and reimburse FSN Ohio for the cost of Masillon's expert testimony and economic consulting costs, which FSN Ohio had been required to pay as part of the arbiter's decision.
ACA pointed out that Massillon spent $1 million in "an FCC-designed process that was intended to remedy the harms of the News Corp.-DirecTV transaction," but wound up losing in the protracted process, one it says larger companies can better afford. "
"The Massillon ruling (attached) highlights the fact that the baseball-style commercial arbitration process is slanted in favor of large programmers over smaller operators," said ACA president Matthew Polka in a statement. "Put simply, a large programmer like News Corp. or Comcast-NBCU has the incentive and substantial resources to ensure that the process is costly and unpredictable in an effort to dissuade budget-constrained smaller operators from ever considering arbitration a viable option."
ACA has asked for conditions on the Comcast/NBCU deal that would protect smaller operators from a cost-prohibitive process.