Cable operators scored a rare victory last week at the Federal Communications Commission, but chairman Kevin Martin is probably going to make sure the celebration doesn’t last very long.
The best news in a while for cable arrived last Wednesday, when an FCC administrative law judge ruled in favor of Comcast Corp. on a number of key procedural issues in the MSO’s carriage dispute with NFL Network.
The ALJ also backed Comcast and other cable MSOs in similar battles with Wealth TV and Mid-Atlantic Sports Network.
The ALJ’s ruling likely put off final action for months, meaning President-elect Barack Obama’s FCC appointees will be the ones who end up deciding who’s right — Comcast or the mighty National Football League — in the most high-profile carriage dispute in FCC history.
But Comcast and 12 other cable operators serving 86% of cable homes have an interim worry: Martin clearly signaled last Tuesday that he is willing to issue fines to MSOs for migrating channels from analog to digital tiers without providing subscribers or local regulators with sufficient notice.
Martin might decide to fine cable operators for failing to complete an FCC questionnaire that wanted not only channel-migration data but also the amount of money operators pay to certain programmers going back two years.
“I think companies that didn’t provide sufficient answers will be subject to the commission’s enforcement actions as they always are when companies don’t provide sufficient information,” Martin said. “I haven’t said what [we’ll] end up doing,” he said. “I was asked, 'Did that include the potential for fines?’ I said yes, it always does.”
Martin gave the MSOs just 14 calendar days to file their responses, an unusually short period of time that suggests he wants Enforcement Bureau staff under his control to mete out punishment before he steps down in January.
While Martin has control over the channel-migration investigation, he has lost control of the Comcast-NFL Network bout.
In October, FCC Media Bureau chief Monica Desai ordered ALJ Arthur I. Steinberg to wrap up his consideration of the Comcast-NFL Network case by Dec. 9, a 60-day deadline.
In his ruling, Steinberg refused, saying that deadline was unrealistic because the Comcast-NFL Network matter was just one of six program carriage controversies sent to him by the Media Bureau.
The league-owned NFL Network is seen by about 2 million Comcast subscribers who generally pay extra to view the channel. The network aired its first of eight regular season games on Nov. 6. The NFL has gone to court and to the FCC to force Comcast to deliver the channel to the 70% of subscribers who have digital service.
Steinberg’s ruling also tossed out the Media Bureau’s conclusion that Comcast had discriminated against NFL Network, a finding that NFL commissioner Roger Goodell had been trumpeting in letters to Capitol Hill and in editorials circulated to media outlets.
Steinberg decided to hear the entire case anew, disregarding Desai’s finding of discrimination.
A Comcast spokeswoman declined comment.
In a statement late Wednesday, FCC spokesman Robert Kenny said, “The Media Bureau has found that the initial standard of discrimination has been met and we hope that the judge resolves this matter in favor of consumers as soon as possible.”
The NFL Network released a statement that sidestepped Steinberg’s refusal to rule within 60 days, even though the channel’s lawyer stressed the importance of a speedy decision during an Oct. 27 hearing.
“NFL Network is pleased that the [ALJ] has rejected Comcast’s attempts to delay this proceeding through a needless appeal to the full [FCC] — an appeal that sought to challenge the clear legal standards that support the NFL Network’s complaint. We’re particularly glad to note that the ALJ’s order did not accept Comcast’s position that it was exempt from the statutory prohibition against discrimination because of its contract with the NFL Network,” the NFL Network’s statement said.
Steinberg is also hearing similar cases involving WealthTV against Time Warner Cable, Bright House Networks, Cox Communications, and Comcast; and regional sports outlet MASN against Comcast. MASN is the pay TV home of Major League Baseball’s Baltimore Orioles and Washington Nationals.
Under his ruling, those cases will also start from the beginning and likely won’t be resolved for many months. Recent ALJ rulings have taken at least seven months to complete.
With regard to cable’s channel repositioning, Martin indicated annoyance with Comcast, which refused to supply all the information Martin wanted.
Martin is probing 13 cable operators about whether they moved channels to digital and then charged consumers to rent digital boxes to maintain access to the same number of channels.
A group of independent cable programmers sent Martin a letter last Wednesday protesting aspects of the investigation.
“We … are concerned that this inquiry and the suggestion that analog-to-digital channel changes may violate 'various requirements’ of the FCC’s rules may have the unintended effect of slowing the current analog digital transition by cable operators,” the programmers said.
The letter was signed by Charles Humbard, CEO of Gospel Music Channel; C. Michael Cooley, CEO of The Sportsman Channel; Mo Hassan, CEO of Bridges Network; Jacob Arback, president of The Africa Channel; Lawrence Meli, CEO of AmericanLife TV Network; and Patrick Baldwin, vice president and general manger of Retirement Living TV.
They added, “Many cable operators launch new channels at the very end or beginning of the calendar year. If your inquiry creates uncertainty among cable operators that results in a delay of the conversion, it would have the unintended effect of delaying such launches and conceivably of requiring deletions of cable channels because the additional planned capacity resulting from conversion would be temporarily unavailable.”
On Oct. 30, the FCC sent letters to cable operators in a broad investigation that demanded channel-movement data back to 2006 on a per-system basis. The FCC also asked for the wholesale prices cable operators pay for some cable channels, commercially sensitive material that the programmers said deserved “the highest level of confidential treatment available.”
Martin suggested that Comcast is looking at a fine as punishment for filing an incomplete response.
“They didn’t even answer the questions directly. They had a narrative, but they didn’t even answer the specifics of the questions directly,” Martin said, referring to Comcast.
“Different operators provided different levels of information,” he said.
Comcast gave the FCC an overview of its digital migration policy but didn’t provide a granular look at its programming contracts.
“There was not detailed programming cost information in there,” a Comcast spokeswoman said. “After reviewing their request for information, we determined that it would have taken over 1,500 man hours just to compile the information for 2008.”
Martin said he didn’t think that in the end the FCC would force cable operators to return channels to the analog tier.
“I don’t think that we’ve ever ordered, [in] the failure to provide adequate notice, that the relief [is] to move the channels back,” Martin said. “I don’t think we’ve done [that] in the past. I’m not sure that there is a limit on our authority per se, but I don’t think that’s what we’ve done in the past where there have been violations, for example, of not providing adequate notice [to cable customers or local governments].”
The FCC is also looking at whether cable operators lowered the price of an analog tier after channels had been removed. The agency is trying to determine whether consumers and local governments were properly notified.
“We stand ready to work with them and to see how best to proceed from this point. The amount of information was so substantial and the amount of time very short,” the Comcast spokeswoman said.