Comcast Plays Offense

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Comcast Corp. is seeking the end of federal program-access rules, but DirecTV Inc. and Verizon Communications Inc. are rejecting the proposal as premature and potentially threatening to competition.

Comcast is taking aim at rules that require cable companies to sell their programming to pay TV rivals at fair prices. The rules, due to sunset in October 2007, are restricted to satellite-delivered networks affiliated with cable companies. Terrestrially delivered cable networks, such as Comcast SportsNet in Philadelphia, are exempt.

Based on robust competition in the pay TV market, especially from the direct-broadcast satellite industry, Comcast is urging the Federal Communications Commission to “initiate a review and eliminate the prohibition” on exclusivity between cable MSOs and their satellite programming affiliates.

FALLBACK POSITION

Comcast offered a backup plan to full repeal.

“At the very least, the [FCC] should modify the rule so that it cannot be invoked by a [pay TV distributor] with more than 10 million customers, or that by itself distributes programming on an exclusive basis,” the MSO said.

Comcast’s fallback position would write DirecTV and EchoStar Communications Corp. out of the program-access regime, as both serve more than 10 million subscribers.

It might even capture Verizon — a reseller of DirecTV programming packages, one of which is the National Football League “NFL Sunday Ticket” out-of-market package, which is off-limits to cable operators.

Comcast’s request, made in FCC comments July 23, was designed to assist the agency in preparation of its annual cable-competition report for Congress. The commission has prepared 10 such reports.

DirecTV urged the FCC not only to retain the program-access rules, but to consider expanding them to terrestrially delivered networks.

DirecTV, now controlled by News Corp., said Comcast refused to sell CSN Philadelphia — the cable home of Major League Baseball’s Philadelphia Phillies, the National Basketball Association’s Philadelphia 76ers and the National Hockey League’s Philadelphia Flyers — unless it agreed to “outrageous carriage offers.”

The DBS firm also said Cox Communications Inc. withheld Channel 4 San Diego, which has exclusive rights to San Diego Padres MLB games. Both Comcast SportsNet and Channel 4 San Diego are terrestrial services.

DirecTV acknowledged that NFL Sunday Ticket is sold exclusively to its subscribers, but argued that program-access issues were not implicated because DirecTV is not affiliated with the NFL.

“If DirecTV’s continuing ability to win customers from cable is threatened by innovative packages or lower cable prices, that is DirecTV’s problem. If, however, it is threatened because cable-affiliated programmers withhold regional sports programming from their affiliates’ competitors, that is a public-policy problem,” DirecTV said in its FCC comments.

In its comments, Verizon called on the FCC to broaden, or ask Congress to widen, the program-access rules to include cable-affiliated terrestrial networks.

“Without access to much terrestrially delivered programming — especially 'must-have’ items, like regional sports networks and news programming — new entrants are at a serious disadvantage when competing against incumbent cable companies,” Verizon said.

REDEFINING COMPETITION

Comcast made another proposal to the FCC. Under the commission’s current rules, MSOs are required to demonstrate to the FCC that they face effective competition and should no longer be subject to basic tier regulation by state and local governments. Effective competition, roughly defined, means that EchoStar, DirecTV and various overbuilders combined serve at least 15% of the households in a franchise area.

Comcast said the FCC should craft new rules that presume effective competition statewide in any state that has 15% DBS penetration. According to the National Cable & Telecommunications Association, 41 states have at least 15% TV household penetration by satellite, including DBS and C-Band.

Comcast also noted that the FCC faces no timetable for responding to cable operator petitions for effective competition. The cable company said the agency should consider adopting deadlines.

In an example not cited by Comcast, the FCC took four years to act on a petition filed by Cablevision Systems Corp. for systems in Boston.

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