Washington -- A federally authorized arbitrator has ruled that Time Warner Cable's offer to distribute a regional sports network just to its North Carolina customers with a digital package was discriminatory and effectively a denial of carriage.
The ruling was another victory for the owners of Mid-Atlantic Sports Network, an RSN that controls the pay-TV rights of baseball's Baltimore Orioles and Washington Nationals. MASN went to arbitration after failing to reach an accord with Time Warner Cable, which serves 1.5 million Tar Heel state customers.
In his decision, arbitrator Jerome Sussman concluded that Time Warner Cable knew that in order to survive economically, MASN needed analog tier placement, because nearly all of the operator's customers subscribe to that service. Offering digital carriage, he said, was tantamount to no carriage at all because just 50% of Time Warner's customers were digital-ready. The lack of full distribution, Sussman concluded, could lead to MASN's being "squeezed out of business."
Sussman held that the digital offer was discriminatory as well because all other RSNs carried in the state, including one owned by Time Warner, were placed on the analog tier.
"This is exactly the kind of discrimination that I think the [Federal Communications Commission] intended to prevent," Sussman wrote.
The FCC set up arbitration for "independent" RSNs in 2006 when it agreed to allow Comcast and Time Warner to divide the cable system assets of bankrupt cable operator Adelphia Communications.
After the FCC backed MASN in a dispute with Comcast soon thereafter, Comcast immediately raised rates $2 per month for 1.6 million Washington D.C. area customers – whether they watched pro baseball or not.
Time Warner intends to appeal the ruling to the FCC, but that could be a dead end because the agency is run by chairman Kevin Martin, who has pursued a hostile cable agenda for nearly three years. So the stage appears set for the arbitrator to award MASN analog carriage, although the fee that Time Warner needs to pay MASN has not been determined.
"There is simply no basis to conclude that Time Warner Cable's decision not to provide broad distribution of a Regional Sports Network that features teams from Baltimore and Washington, D.C. on its systems in North Carolina was in any way improper," Time Warner Cable said in a statement.
Sussman handed down his decision on Jan. 7. MASN sent it to reporters on Monday. Time Warner Cable may seek a full FCC review of Sussman's final decision within 30 days.
In an interview Monday with Multichannel News, Sussman said that his ruling did not mean that MASN would automatically receive analog carriage. After MASN and Time Warner Cable submit their best offers, Sussman is charged with picking one of them unchanged. Sussman, who has not received the final bids, said he had scheduled an additional hearing in March.
In his five-page opinion that went heavily against Time Warner Cable, Sussman said "the most difficult issue" was whether TWC's digital tier offer was "a denial of carriage," triggering MASN's right to go to arbitration under the FCC's Adelphia order.
In ruling against the operator, he found that the Time Warner Cable's motive for placing MASN on a digital tier was to protect its own RSN called News 14 Carolina, which airs the games of the NBA's Charlotte Bobcats. Sussman said it was a "possibility" – for which he said there was no evidence in the record – that Time Warner Cable wanted to see MASN collapse so it could add the Orioles and Nats games to News 14's sports lineup.
"I agree that TWC is entitled to substantial level of editorial discretion in determining what channels it will distribute and on what tiers, but that discretion must be exercised in good faith. Since MASN alone was singled out for broadcast on a digital tier, that discretion was abused, and I conclude that Time Warner exercised its discretion here with an intent to discriminate," Sussman said.
Sussman's opinion didn't explore Time Warner Cable's chief defense – that digital carriage was justified because the Orioles and Nats were located hundreds of miles away, with limited local appeal. Nor did the opinion mention MASN's ratings in North Carolina based on carriage deals with DirecTV, Dish Network, Mediacom and Charter. Sussman said although he reviewed relevant ratings data, he said he wanted to keep his opinion to a few pages
Lastly, Sussman sided with MASN based in part because the operator's digital tier was "available" to just half of subscribers. In fact, the digital tier is "available" to nearly all Time Warner Cable customers in North Carolina – but only half so far have chosen to buy it. Sussman did not explore whether demand of the digital tier would rise with the addition of MASN.