AT&T Files Program Compliant Against Cox

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Washington—AT&T on Thursday filed a complaint at the Federal Communications Commission to obtain access to a San Diego sports channel wholly owned by local cable incumbent Cox Communications.

AT&T said it can't compete effectively against Cox in the Southern California pay-TV market without access to Cox-4, the regional sports channel which has exclusive rights to San Diego Padres baseball games.

“AT&T has experienced increased churn and order cancellations as a direct result of the lack of this vital programming—so much so that AT&T has been forced to require new customers to sign acknowledgements that AT&T does not carry Padres games,” the telecommunications giant said.

Under federal law and FCC rules, cable operators are required to sell their satellite-delivered channels to other pay TV providers. So far, the FCC has not adopted a rule that requires the forced-sale of terrestrially delivered cable networks affiliated with cable operators.

Cox is relying on the so-called terrestrial loophole as the basis for withholding Cox-4 (which Cox refers to as Channel 4 San Diego) from AT&T, which has entered the multichannel video pay-TV market with modest success by offering an IPTV service called U-verse.

“Our distribution of the Padres content is entirely consistent with applicable law and regulations; we are not required to share the benefits of Channel 4 San Diego and its Padres content with AT&T,” said Cox director of media relations David Grabert.

Channel 4 San Diego airs about 150 Padres games, and Cox makes the channel available to Time Warner Cable, which also serves the San Diego market, Grabert said.

Cox—which has about 5.4 million subscribers nationally—operates the fourth-largest cable system in the country in San Diego, serving about 420,000 customers.

AT&T's U-verse had 549,000 subscribers as of the end of the second quarter. The company is planning to make the service available to 30 million households in 22 states by the end of 2010.

In the complaint, AT&T described Cox-4 as “must have” programming essential to a level competitive playing field because subscribers value live sporting events so highly.

AT&T insisted that the FCC had legal authority to order the sale of terrestrially delivered programming because Cox’s decision to withhold Cox-4 “directly affects the competitive distribution of satellite delivered-programming that is expressly covered by [federal law].”

AT&T, Grabert said, was late developing a pay-TV product and was now looking to the government to help it compete.

“AT&T's claims of unfair competition are unjustified and directly contradict the marketplace reality of fair competition,” he said. “Video providers are allowed to compete based on this type of product differentiation—for example, Direct TV has exclusive rights to NFL Sunday Ticket—just as many other types of companies do. Likewise, AT&T is the exclusive carrier of Apple’s iPhone, which prohibits other wireless carriers to offer the iPhone.”

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