A three-judge panel of the D.C. Circuit Friday denied Cablevision and Comcast's challenge to the program-access rules, according to a copy of the opnion.
The court ruled that the FCC was reasonable to conclude that the rules are still necessary, but that at the current pace of change in the marketplace, it they probably won't be the next time the FCC reviews them.
The court essentially concluded that, while the multichannel video marketplace had gotten more competitive, it was not sufficiently so to render arbitrary and capricious the FCC's decision to renew the program access rules for another five years back in 2007.
"Like the must-carry and retransmission-consent regime that allowed ABC to black out the Oscars for 3 million New York households this week, the program-access rules are based on an outdated and obsolete view of the competitive landscape," said Cablevision in a statement. "In today's highly competitive video marketplace, these rules do nothing but tilt the playing field in favor of phone companies and broadcasters to the detriment of fair competition and consumers."
Cablevision has not ruled out appealing the decision to the full court. Asked it it would appeal, a company spokesman said the cable operator is "considering its options."
A Comcast spokeswoman Friday afternoon said the top cable operator would not appeal the decision.
The ruling means Comcast won't have to volunteer to abide by program-access rules as a condition of its proposed joint venture with NBC/U, as it had offered as recently as Thursday in a Hill hearing to do even if they were thrown out by the courts.
The access rules prevent cable operators from striking exclusive deals for satellite-delivered programming in which the operator has a financial interest. The rules have not applied to terrestrially-delivered programming, but the FCC last fall took action to close that exemption.
"The amount and diversity of programming has expanded rapidly, giving MVPDs more programming options even if one network were unavailable to them because of an exclusive contract," wote Chief Judge Dvid Sentelle for the majority. "However, the four largest cable operators are still vertically integrated with six of the top 20 national networks, some of the most popular premium networks, and almost half of all regional sports networks. The Commission believes the ability and incentive for vertically integrated cable companies to withhold "must-have" programming remains substantial enough to require the further extension of the exclusivity prohibition. We must defer to the Commission's analysis."
The decision was 2-1, , with Judge Thomas Griffith concurring and Judge Brett Kavanaugh strongly dissenting, saying he thought the exclusivity rules were discriminatory and clearly violated the First Amendment.
Kavanaugh points to the fact that the second and third-largest MVPDs, DirecTV and Dish Network are not subject to the exclusivity ban, while Cablevision, the seventh largest, is. "What justification is there for such discrimination against a less powerful entity? None - or at least none that the FCC has provided," he wrote, adding "It bears mention, moreover, that this discrimination against certain video programming distributors was not a considered legislative decision; it is simply an unintended relic of the far different video programming distributor market that existed in 1992 when Congress passed the Cable Act."
"The Commission's program-access rules have played a vital role in making diverse and attractive video programming available to cable and satellite TV viewers," said FCC chairman Julius Genachowski in response to the ruling. "I'm pleased that the D.C. Circuit court has confirmed the Commission's authority to prevent vertically integrated cable companies from denying critical television programming to their competitors and consumers."
The court had some problems with how the FCC decided there was still a threat of withholding programming, despite the cable industry's argument that a competitive marketplace was a sufficient governor on that threat.
"[T]he Commission's calculations on the likelihood of future [program] withholding appear susceptible to questions about their predictive power. What is true about Comcast SportsNet Philadelphia may not be equally true for all regional networks and even less true for national networks, yet the Commission still used that one station as the basis for much of its analysis." But the court was not ready to get into the "murky sicence" of predictive judgments itself and conceded that "the Commission naturally has no access to infallible data about the ature of contracts that do not exist. "W]e do not sit as a panel of referees on a professional economic journal, but as a panel of generalist judges obliged to defer to a reasonable judgment by an agency acting pursuant to congressionally delegated authority. The Commission has recognized and analyzed complicated pictures of the MVPD market both current and projected. These data qualify as substantial evidence for arbitrary and capricious review."
But while the FCC may have made a justifiable call this time, the court concluded, next time could be another matter. "We anticipate that cable's dominance in the MVPD market will have diminished still more by the time the Commission next reviews the prohibition, and expect that at that time the Commission will weigh heavily Congress's intention that the exclusive contract prohibition will eventually sunset. Petitioners are correct in pointing out that the MVPD market has changed drastically since 1992. We expect that if the market continues to evolve at such a rapid pace, the Commission will soon be able to conclude that the exclusivity prohibition is no longer necessary to preserve and protect competition and diversity in the distribution of video programming."
Cablevision and the FCC had squared off in the court in oral argument back in September over the FCC's five-year extension of the program access rules back in 2007, with both sides getting some tough questions.
At the time, Chief Judge Sentelle suggested Cablevision had a high hurdle in asking it to overturn the predictive judgments of the FCC in not sunsetting the program access rules, suggesting it had been years since the court did something similar.